How to Get a Car Loan With Bad Credit and No Bank Account
Getting approved for a car loan with bad credit is tough enough. If you also don’t have a bank account, the approval becomes more difficult to obtain. Nevertheless, it is still possible to get a car with a Bad Credit Car Loan.
Subprime Auto Lenders
A bad credit car loan is offered by subprime auto lenders. These creditors specialize in lending to borrowers with bad credit history and do not qualify for prime rate loans.
The catch? They require a more substantial down payment and charge higher interest rates than traditional loans. This is to compensate for the risk of you defaulting on your debt repayment. They may also have a higher closing cost and shorter time horizon for repayment.
Without a bank account to prove your stable source of income, you’re more likely to pledge your car—new or used but in good condition—as collateral for the loan. This is called a secured loan.
Your lender will pay for the full price of the car while you will pay off this debt plus the interest fee every month. In the event that you default on your future loan repayment, the lender can repossess your car and sell it to recover the loan amount.
5 Things to Consider
Before getting a car loan with a subprime auto lender, you should know the:
- Types of interest rates on the loanThe rates offered for a secured car loan can be fixed or variable. If the car loan has fixed interest rates, you will pay the same exact amount every pay period throughout the term of the loan. With variable rates, on the other hand, the interest rates on the outstanding balance fluctuate according to the benchmark interest rate.
- Loan term periodsShort-term loans that usually take about 2 to 3 years to pay usually carry higher interest rates than long-term loans (5 to 10 years).
- Loan payment structureA downpayment is the initial lump sum amount that you pay at the start of your loan term. It’s called balloon payment if it is paid at the end of the term. While both help to reduce the overall loan amount, only one works best for your financial situation.Use a Car Loan Calculator to know how much you can afford for a car loan. This tool provides an estimate of your car loan payments but it often does not include your personal or business finance profile in the calculation.
- PenaltySome subprime lenders have various pre-payment penalties if the loan is repaid early.
- Payment ProtectionThis protection in your auto loan plan can safeguard you in times of unforeseen circumstances.
Scams and Loan Sharks
Be on the lookout for scams when seeking out subprime car loans. Being in dire need of a car but having a bad credit score may leave you vulnerable to loan scams and loan sharks.
- As much as possible, get help only from established car dealers and financial institutions.
- Avoid paying a higher interest rate than what you qualified for by knowing your likely interest rate beforehand. Try to prequalify for car loans with a few other subprime auto lenders to get an estimate.
- Shop for the lowest available subprime rate before getting one.
- Make sure you understand everything on the loan contract before signing. Get it reviewed by an attorney if possible.
Positive Lending Solutions offers Bad Credit Car Loans. Our loan experts can get you the best deals from over 30 of Australia’s leading banks and lenders. Call us on 1300 769 384 or fill out our 30-second Quick Quote form to learn more about the process.
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