The truth behind bad credit or no credit car loans

With today's economic downturn and ever rising unemployment rate across North America, the so called "sub-prime" or bad credit car loan business is growing exponentially year after year. With this out of control growth in the sub-prime market followed by "in your face" advertising, it is difficult to understand and to distinguish the differences between these high interest rate car loans. In this article I will attempt to demystify some of the concepts between them and hopefully this will offer you some guidance next time you are looking for such service. First of all let's put things in perspective once for all. Popular phrases you see in today's advertising such as "bad credit", "no credit", "new credit", "new to the country", "recently divorced", "bankruptcy" all fall under the category of sub-prime. Sub-prime just like the word suggest is below prime, prime good credit, sub-prime logically is considered bad credit. This invisible dividing line lies in your credit score, any credit score that is below 640 is automatically considered sub-prime.

Sub-prime itself divides into two major categories, bad credit been one, no credit been the other one. The only difference between the two is bad credit means you have credit history, due to late or missing payment, or defaulting on a previous loan, you are now considered to be a risky applicant in the eyes of the banks. While no credit means exactly that, you have no credit history behind you. This will apply to students, new immigrants, anyone who has no credit card in their name or no credit history. This type of credit is equally as bad in the eyes of the lender. The only other type of car loan is considered to be no credit required, or no credit check car loan services.

The no credit required or no credit check car loans are the types of car loans where the lender will not require any credit at all to offer you an approval. The risk factor in these types of loans is extremely high, but the funds are mostly coming from the private sectors instead of your typical lending institutions. In another word these loans are coming from some one much like a loan shark rather than the banks. These types of loans will not require any credit at all, but it should be reserved as your last resort, because even these no credit check car loans will keep track of your payment history. If you default on your payment at these types of car loans, you will not be able to obtain a car loan again! So consider your options carefully before applying.

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