What Should I Know About a No Credit Car Loan?

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  • Written By: Ken Black
  • Edited By: Bronwyn Harris
  • Last Modified Date: 01 February 2019
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    Conjecture Corporation
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While there may be good reasons to consider a no credit car loan, there can also be some dangers. In some cases, a no credit car loan may seem like a good solution for those who have bad credit or no credit history whatsoever. Indeed, it may be. However, there are often strings attached to such a loan that need to be looked at very carefully.

In most cases, those who want to buy a car will either contact a lender and then go to a car lot, or go to the car dealership first and work through their lenders. Normal car loans will be processed considering the applicant's employment history and credit rating. A no credit car loan usually bypasses that second step.

A no credit car loan is usually only applicable to situations where a buyer is looking at used cars. These used car loans are often easy to spot at some dealerships. First, these dealerships will only deal with used cars. Second, they will often contain a slogan similar to "Buy here, Pay here." This is the first sign that no credit will be required in order to make the purchase.


Sometimes, this type of used car loan will be a good solution for those who have temporarily fallen on hard times that ruined their credit ratings. For example, those who were hit with a divorce, temporary unemployment or who were struggling with medical bills may find themselves in a situation they would not normally be in. Those who simply have problems managing their money and debt should try to avoid a no credit car loan.

Those applying for a loan of this type should also ask if the loan holder will be reporting to the credit reporting agencies. This should be done. For those who want to rebuild their credit and will try in good faith to repay the debt, this is a positive. However, very few no credit car loan lenders will offer this service, meaning there will be no reward with the credit bureaus for paying on time.

The reason for those with poor money management skills to avoid these car loans is because there are some penalties associated with them that may not be included with traditional loans. Whenever there is a high risk loan, the interest rate is automatically going to be somewhat higher than it would otherwise be. However, if a payment is missed, the interest rate on a no credit car loan is likely to go even higher.

In some cases, one late payment may be grounds to repossess the vehicle, thereby causing the buyer to lose all equity in the home and allowing the seller to resell the automobile. This may be a way many of these dealerships earn a living, reselling a car time and time again. It is very important for the buyer to read all fine print in the terms and conditions so that he or she knows what the consequences of a late payment or missed payment are.



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