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Buying a car involves many painstaking decisions, one of them being how to finance the it. If you have poor or limited credit or are simply a first time buyer without a credit history, this can be difficult. You have options: no credit check auto loans and subprime auto loans.
What are No Credit Check Auto loans?
No credit check auto loans are a good way to secure funds towards a car loan if you have a poor credit score or are a new buyer. You can get more than $1000 towards a car loan almost instantaneously with this type of loan, regardless of your credit situation. The approval process is quick as you only need to show proof of residence and your last paycheck to show that you earn a monthly sum of $1000 or more.
If you need money for a car immediately, a no credit check auto loan is a viable option.
Understand the risks involved
When you go for no credit check auto loans, you should know about the risks involved. If you plan on living from one loan to another using no credit check auto loans, you’re setting yourself up for more debt. This type of loan is best used in emergencies, for example, buying a car for your daily commute to the office and back. It is advisable to take the loan if you know that you will be able to pay it back the following month or the one after that.
In these cases, lenders will be looking for proof of steady flow of income instead of looking at your past financial behaviors.
What are Subprime Auto Loans?
Subprime loans are as they sound: “sub-prime.” A credit score that is prime is considered to be good to go for regular loans, as it shows that the borrower ticks all the boxes in the lenders book. It shows that the borrower has been on time with payments and has a history of good repayments on their credit report as reflected in their score. FICO scores of 640 and above are generally considered “prime” while lower scores are considered “sub-prime”.
A sub-prime auto loan is a type of auto loan specifically for people who either have sub-prime credit scores or are relatively new to credit (limited credit history). They usually carry a higher rate of interest than regular loans.
Risks involved in Subprime Auto Loans
Subprime auto loans also come with considerable associated risks. You could wind up paying more than the cost of the car in the long run. Your car starts depreciating the moment it leaves the lot and depreciates at the rate of 25% each year according to Edmunds, an auto buying research firm. Subprime auto loans will not be paid off as quickly as the car falls in value.
Importantly, if you plan to sell the car earlier in its lifetime, you may owe more than the actual value of the car. Therefore, you should be extra careful when using this type of auto loan.
Come to Hawthorne Auto Square where we finance drivers with bad or no credit and have a huge inventory to choose from. We have helped countless people get the car they’re looking for with our easy financing!