”Your Job Is Your Credit” is a term used loudly and proudly by many buy-here-pay-here (BHPH) dealerships. It simply means that if you have a job, you are going to be financed for one of the cars on their lot. Basically, the dealer is saying that they won’t check your credit–rather, your job/income is the deciding factor in your approval. It sounds like a great opportunity if you have been denied by other lenders for bad credit and desperately need a car, but is it really a sensible way to borrow money?
How “Your Job is Your Credit” Financing Works
A BHPH or “your job is your credit” dealer works by directly offering loans to a buyer. They normally have simplified loan paperwork and are primarily concerned with how much you make each month. In general, they will offer a loan to anyone who walks through the door. From that point of view, a BHPH sounds awesome.
On the other hand, the cars always have high mileage, are over eight years old, are rarely in the best condition, and are always priced well above their value. On top of that, most BHPH dealerships will charge the highest interest rate allowable in your state. In some instances, that is 25 percent. To make matters worse, a BHPH will not report the loan to any credit reporting agency, so your credit score will remain low and you may be forced to use the same BHPH over and over again. So, to sum a BHPH up, you will be required to pay a ridiculous interest rate on an over-priced, poor quality car and the loan will not benefit your credit score in any way. Sounds like you are being kicked when you are down, doesn’t it? This has led many to question whether this type of financing is a scam, though the industry has been around for quite a long time.
Your Main Option
There are many auto lenders who are willing to work with any credit score. These are licensed finance companies that choose to keep their costs down by mainly operating online. Since they are willing to deal with riskier loans, you can expect that they offer different terms than your local bank. These terms include a higher interest rate, but the rate is usually several points below what you will be offered at a BHPH. The second is a shorter loan term. Generally, you will need to repay the loan within 36 months. While that is somewhat short, BHPH dealerships require that all loans be repaid within 30 months. You will be required to offer a cash only down payment, but the amount can be less than you need to offer a BHPH. We can put you in touch with a local finance specialist who can help you line up the loan you need, regardless of your credit history.
You will likely be offered a much better interest and terms than you would for a “your job is your credit” loan.