Payday loans have a bad reputation, but automobile loans look like a much better deal compared to them. Basically, you are taking out a loan for an asset that costs thousands of dollars, so you wouldn’t think that you could do this if you don’t have a bank account. That is not necessarily the case.
Obtaining a Car Loan
If you were to ask anyone at your local car dealership, they would tell you that the most important thing you must have to be approved for a car loan is a source of income. This doesn’t mean that they are completely unconcerned if you don’t have a bank account, but it is not the sole reason that you would be able to obtain a car loan.
The reason that a bank account isn’t absolutely essential is because the car is considered to be “collateral.” If you stop making your payments, the lender can easily repossess the vehicle. Therefore, lenders can grant loans to those without bank accounts on a regular basis.
How’s Your Credit?
There is just one problem. If you are in a financial situation that doesn’t allow you to have a bank account, you may also have a low credit score. The low credit score will be what subjects you to being charged a high interest rate, but there is a bright side to this. You will be making monthly payments on your loan, and when you do this on time every month, your credit score will increase.
Watch Out for Dishonorable Lenders
Even though it is possible to get a car loan, you must be aware that you are a target for disreputable “lenders.” You are exactly the type of person whom these “lenders” are seeking. Particularly what you need to look out for are those who want to give you a loan with an extremely high interest rate or a quick loan. You don’t have to get caught in a trap with these people because there are plenty of trustworthy lenders who will grant loans to those with lower credit scores. The problem is that you will run into the dishonorable ones as well, so we will examine how to tell the difference between the two.
A very popular type of lending that often falls under the category of disreputable lenders is “payday loans.” You may have heard of a payday loan, but what exactly is it?
A payday loan is an advance on your paycheck that is supposed to be a very short-term loan. In fact, it is meant to be paid back when you receive your next paycheck, and you receive this service for a fee. The lender can charge these fees in one of two ways. The first is to charge a fee based on the amount that is to be borrowed.
The lender can also charge a fee on every $50 or $100 that you borrow. Therefore, if you borrow $200 and the fee is $50 for every $100, your total fee will be $100. If you are unable to pay the entire amount when it is due, you can extend the loan’s terms, but you will be charged extra fees for doing so. This is exactly how many people have gotten into an impossible situation where they could not re-pay their payday loans.
Beware of High Interest Rates
As was mentioned above, these lenders have a very bad reputation because they are taking advantage of people who are in bad financial situations. The interest rates they charge are equal to 300 percent to 700 percent, so several states have enacted legislation that prohibits them from charging astronomical rates, but not every state has these laws. Make sure that you avoid paying high interest rates such as these at all costs.
Avoiding the Scammers
The first thing you need to do is examine the ads these payday lenders have on television, the radio or the Internet. These loans go by several different names, including cash advance, deferred deposit loans and post-dated check loans. According to the Federal Trade Commission, there is a high price to pay for these loans, so it is better not to get started borrowing from a payday lender.