No Credit Check Auto Loans – A New Approach To Vehicle Financing

Many people dream of a new car or a truck, but think they would not be able to get an auto loan due to their bad credit. The good news for bad credit borrowers is that there is a new service designed specifically for people with credit blemishes called no credit check auto loans. The greatest advantage of this new lending product is that it does not consider the credit history of the borrower at all, so it does not matter how bad your credit is to avail from this loan. Well, what is the trick, then? The way these programs work is that require collateral to be pledged by borrowers, and a steady employment with sufficient source of income to cover car loan payments. While such lenders charge higher rate when compared to traditional car loans, they are highly competitive in the bad credit market.Collateral RequirementsAll auto loans are secured loans, as the vehicle that is financed serves as collateral to secure the interest of the lender. So why is there a need for additional assets to be pledged as collateral? Everybody knows that cars quickly depreciate, as new cars loose nearly a quarter of their value once they are titled and driven off the lot. Therefore, should a borrower fail to make monthly payments right from the start, the lender will be stuck with an asset that will only be able to cover 75% of the loan value. In addition, as there is no credit check performed, there is a great deal of uncertainty regarding the payment behavior of a borrower. That is why lenders secure themselves by requiring additional collateral.Most people think that only their home may serve as collateral. While most lenders consider equity in real estate as safe collateral, they may consider many other assets to secure the transaction, such as land, machinery, equipment, and other vehicle that you may own. As recent turbulence in real estate market caused home values to plummet, lenders are very flexible with collateral options today. It is important to understand, however, that securing your loan with your personal assets besides the car you are purchasing is an additional risk in case of default, as lender may repossess your assets to cover the losses from your default. Therefore, only consider collateral loans if you are sure you would be able to make timely payments on your auto loan.Income RequirementsBesides securing the loan with collateral, lenders also consider your income as a part of underwriting process. They need to make sure that you would be able to honor your obligations on a monthly basis, and therefore require sufficient income of the borrower to cover loan payments. In addition, proof of steady income is an important factor that determines the interest rate on your loan – the better your income situation is, the less you would end up paying in interest charges. Before even considering a no credit check auto loan make sure you have all your employment and income documents in place to include paystubs, tax returns, and a letter from your employer.Shop Online To Get The Best Rates And TermsIt is always good to shop for the best deal. Internet presents borrowers with a great opportunity to evaluate lender offers from the comfort of their home, often by submitting one application only. It is important to look around until you will find a lender offer that would comfortably fit your budget.