Buy-here, pay-here loans are helpful for people who have poor credit but want to buy a car. Nowadays it can be complicated for people with poor credit to get a car loan. In this case, they can get “Buy-here, pay-here” financing.

This financing is provided by dealerships, and here they’re both a seller and a lender. Some dealers call these loans “no credit check” loans that attract people without a credit history.

Such financing may look like a useful option with lots of pros, but it has too high rates. Here’s how these loans work.

The way buy-here, pay-here car financing works

If you borrow a conventional loan to buy a vehicle, a dealer firstly sends your data to the potential lenders. Then you’ll have to make payments to the third-party company each month.

Buy-here, pay-here financing works differently because they’re lent by the dealers. If someone selects this method, he only needs to verify his income and proof of residence. The dealer won’t check credit. Next, the borrower will be presented with the list of available cars from which he can buy a vehicle.

Cons of buy-here, pay-here car financing 

This loan is easy to get, but it has drawbacks that make it less useful. The most significant cons are:

They’re expensive. They have high interest rates that can be 20% or more. Sometimes these loans cost more than a car.
They don’t improve credit. This financing doesn’t let you build your credit to get bigger sums because dealers don’t report payments to the credit bureaus.
Inconvenient to pay. Borrowers have to visit dealerships each week to make payments.
Cars with tracking devices. Some dealers install such gadgets to prevent situations when a borrower doesn’t pay in time and still drives.

Summary  Buy here pay here (BHPH) car financing is the best choice if you have poor credit. Of course, you can spend too much if you borrow it, but It’s a better option when you can’t find lenders with less strict requirements.