Are No-Credit Auto Loans No Problem?

November 8, 2008 12:10 PM

Online auto loans; too good to be true?

My credit is non-existant, but I need to get a new(er) car. I have a good amount of money for a down payment, but no reputable bank will touch me. However, I just found a number of online auto loan lenders who specialize in bad/no credit/bankruptcy loans.

Obviously, there's no such thing as a free lunch. Just as obviously, I'll likely be hit with a usurious interest rate. I'm OK with that for the time being, but I feel like there's something I'm overlooking.

Any MeFites have experience in this area? Are they a scam or a godsend? Any hidden weirdness I should look out for? Any specific recommendations?

Hard facts and anecdotes are equally welcome.

posted by lekvar to work & money (7 comments total)

I used a CapitalOneAuto "Blank Check" loan to purchase a car a couple years ago. Got a great rate and haven't had a problem.
posted by notyou at 12:15 PM on November 8, 2008

Things to be aware of: (1) prepayment penalties are common; if you think you can take a high rate now and refinance or pay off the note to cut the pain, that may not be so. (2) the business model for some (but not all) car lenders to people with poor credit involves aggressive collection efforts -- the calls start if you're a day late, and repossession comes quickly thereafter.
posted by MattD at 1:00 PM on November 8, 2008

Always know your credit score before buying something on credit.
posted by MzB at 1:36 PM on November 8, 2008

Capital One does a good job. you can prepay with no problem, and anytime you make a payment of $2000 or more they will reammortize ( i know i spelled that wrong) the loan
posted by Mr_Chips at 2:22 PM on November 8, 2008

If they are backed by an actual bank, I would say your risk is relatively low. But really, with any lender, bad things tend to happen only if you start missing payments. If the proposed payment is within your budget and you have shopped around to make sure you're getting the best interest rate you can, I'd say go for it.

Do not worry about multiple credit inquiries affecting your credit score while you're rate shopping. The algorithms that calculate your score take this into account. So there is no problem applying at the "big" sites like eLoan and Capital One first, and then trying other lenders if your credit isn't good enough to get approved there. My guess is that Capital One will approve you, although perhaps not for enough to buy a brand-new car. I think in your situation you should be looking at used cars anyway.
posted by kindall at 8:38 PM on November 8, 2008

One thing to look out for with finding a lender online is that the loan industry is incredibly saturated with affiliate marketers right now. These people get paid a hefty commission whenever you obtain a loan after clicking their link.

Things to look out for include redirects off of their site to a lenders where your URL has some weird ID at the end of it (this is their affiliate ID). There's no real harm in using an affiliate's link, it doesn't cost you anything, however you need to realize they have a monetary incentive for directing you towards one particular lend and may saying anything to get you to go through with it, even if it is false or misleading.

Also, affiliates are all over creating fake review sites, so beware of that.
posted by Elminster24 at 10:49 PM on November 8, 2008

Thanks for all the info, folks.
posted by lekvar at 2:38 PM on November 11, 2008