While there are plenty of myths about buy here pay here, this type of financing can be a good option for some consumers. However, before you decide on this type of loan, it’s important to understand the pros and cons.
Typically a dealership, not a bank, finances the purchase of cars through a buy here pay here program. Dealerships also typically don’t perform credit checks when you apply for this kind of auto loan. Because dealers take on more risk with these loans, they often charge higher interest rates than a bank or other lender would. These rates are sometimes called usury rates, and they can be as high as 30%.
It’s also common for buy here pay here taylorsville nc lenders to require that your car be equipped with tracking or disabling devices. This gives the dealership a way to repossess the vehicle if you stop making payments. This can be a huge inconvenience and may violate your privacy. Moreover, dealers often require you to make weekly or biweekly payments instead of monthly, and they may only accept certain methods of payment.
In addition, the CFPB warns that buy here pay here dealerships may not report your on-time payments to the main consumer credit bureaus. This can keep your credit score low even if you’re making regular payments on time. Additionally, these kinds of dealerships frequently offer more loans than a car is worth, which can put you at greater risk of defaulting on the loan.