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What is a “no credit check" or “buy here, pay here” auto loan?

A “no credit check” or “buy here, pay here”auto loan is offered by dealerships that typically finance auto loans “in-house” to borrowers with no credit or poor credit. 

You may see signs like “no credit – no problem” or “military E-1 and up.” The interest rate on loans from these dealerships can be much higher than loans from a bank, credit union, or other lender.

Normally, a bank, credit union, or other lender will limit the amount it will lend for the purchase of a vehicle based on the vehicle’s value. Those lenders will not loan more than the value because the vehicle in question simply isn’t worth it. But when a dealer acts as its own “bank,” it may not set such limits. So you may end up paying thousands of dollars more than the actual value. In other words, with “buy here, pay here,” there is a bigger risk that you will borrow to pay more than the vehicle is worth.

Don’t be fooled into thinking that you have no choice. Even if you have poor or no credit, there may be other lenders that are willing to finance your vehicle purchase. Knowing your options for financing before you start negotiating to buy a vehicle can help you get the best overall deal.