Typically, when applying for a loan, the potential lender performs a credit check (sometimes called a credit check) on the borrower. A loan without a credit check is a viable alternative to traditional financing for those looking for a loan but know their credit history will not be accepted.
A credit check allows a business to access a potential borrower’s credit report from one of the three major credit bureaus – Experian, Equifax, and TransUnion. These inquiries are especially important if the borrower is asking for a large amount of money, such as a home loan or car loan. These reports will show the borrower’s finances and ability to pay.
If a borrower’s credit history shows an abundance of late or missed payments, too many recently opened accounts, or a high credit utilization rate (for example, maximum credit cards), the lender can deny the loan application. These red flags are also negatively impacting the FICO credit rating, and borrowers below 600 are under credit. Credit checks exist to prevent the consumer from borrowing more than he can repay and to protect the lender from financial loss.
You may have gone bankrupt or dealt with collection agencies in the past, causing your credit rating to deteriorate, but you’ve been in charge of your finances ever since. Or you are a recent college graduate who has never applied for a credit card and therefore has no credit history. A loan without a credit check might be right for you.
As the name suggests, a no credit check loan involves no credit check. In financial terms, these are known as subprime loans. Lenders provide these loans to borrowers with a higher risk of default than more favorable blue chip borrowers. However, as with any financial decision, there are pros and cons to using loans without a credit check.
Pros and Cons of a No Credit Check Loan
Since a car purchase costs a lot less than a house (and causes a lot less loss), more lenders are willing to offer auto loans without a credit check. And because reputable lenders who offer subprime auto finance tend to have more options in terms of financial support, they can be more flexible regarding loan term, repayment terms, and interest rates.
The overall process of applying for a car loan without a credit check is straightforward, can be done online, and with same day approvals. Borrowers can also choose not to make a down payment. However, instead of a credit check, lenders may have other requirements before approving the loan, such as the borrower’s permanent address and proof of income.
Depending on your financial situation, however, the disadvantages of an auto loan without a credit check may outweigh the advantages of owning a car. Since subprime borrowers are considered high risk debtors, lenders will recoup potential losses through high interest rates, which would make a car loan without a credit check the most expensive way to pay off. buy a vehicle.
In August, Experian reported that blue chip borrowers with FICO scores of 720 or higher received an average annual rate (APR) of 3.65% for new car loans and 4.29% for new car loans. occasion. Conversely, deep subprime borrowers (a FICO score of 579 or less) averaged 14.39% and 20.45% APR on new and used car loans, respectively. Again, these are averages, and rates can go up to 36% (which some states have capped).
Your vehicle selection may also be limited to a specific price range depending on your income. After all, lenders would rather have you pay off your loan than default. And if you miss payments or give up the loan altogether, the vehicle can be repossessed and resold.
Also, since no credit check is needed to get the loan, no credit report from the lender is needed either. So even if you make payments on time, you are not improving your credit score or increasing your credit history. Ironically, while auto loans without a credit check will not increase your credit rating, non-payment will undoubtedly hurt it. Lenders can send your remaining debt to a collection agency, which will report delinquent borrowers to the credit bureaus.
Another thing to remember is that unfortunately there are some dishonest companies out there, so consider those that charge pre-approval fees or post-dated checks for prepayments as lenders to avoid. Legitimate financiers will not ask you for money up front except in the form of a down payment on your loan. Always check with the Better Business Bureau and confirm the lender’s contact details, especially for online funding sources.
Other loan options for zero or bad credit car buyers
If a car loan without a credit check sounds like a bad idea, there are other auto financing options such as credit unions, personal loans, and someone with good credit co-signing your loan. Credit unions are less restrictive on loan terms and will offer lower rates (for example, federal credit unions are capped at 18%).
With a low credit score, qualifying for a personal loan from a traditional bank is not impossible, but the applications can be complicated and the restrictions will be many. Fortunately, there is no dearth of online lenders offering loans to people with bad credit and will do so without doing a credit check. But keep in mind that the loan amounts may not cover the cost of the vehicle, as some limit personal loans to a maximum of $ 5,000.
Finding a co-signer could make up for any bad credit history you have, as lenders will be more confident that someone will make the payments. Don’t take advantage of the co-signer and be sure to make the payments yourself. Otherwise, a personal relationship may deteriorate.
Other options for obtaining financing without a credit check, while less than ideal, are payday loans and guarantees, or car title loans. Both are short-term solutions (think 30 days), and while neither requires a credit check, they come at a steep cost. Payday loans carry over 400% APRs while secured loans, usually for the amount of the vehicle’s value, also have high interest charges and allow the lender to repossess your car.
Having zero credit or bad credit doesn’t have to be a burden that keeps you from buying a vehicle. Just know that you have options and understand which are better or worse for your specific situation. And if you are just starting out, even a small loan that gets paid on time all the time will help you build a positive credit history so you never have to consider a car loan without a credit check.
A Los Angeles capital markets company has raised $ 63 million in equity to build and rehabilitate hundreds of affordable multi-family and single-family housing units for Native American tribes.
Hunt Capital Partners, a unit of Hunt Companies, acted as an equity syndicator on a dozen Indian housing projects in seven states, providing traditional capital to build 322 single-family and multi-family housing units in places as far away as the Rocky Boy and the Fort Peck Indian Reservations in Montana. Of Hunt’s 12 projects, six are single-family, three are a mix of single-family and duplex homes, and three were fully multi-family.
Besides Montana, Hunt Capital has also been active in California, Maine, North Dakota, Utah, Arizona, and Wisconsin.
The multifamily has an important part, although in the minority, of housing in the Indian country. According to Freddie Mac, about 23 percent of all rental units on bookings are multi-family.
In a recent transaction, Hunt Capital raised $ 2.1 million in equity to build 24 affordable apartments for the Penobscot tribe of Maine. The Penobscot Elder Homes on Indian Island, Maine include 16 one-bedroom units and eight two-bedroom units for people aged 55 and over. All units are reserved for households earning up to 50 and 60 percent of the region’s median income.
In Fort Peck, Hunt has provided equity for 20 apartments, the first part of a larger development that will also contain 100 single-family rentals. The Fort Peck Sustainable Village Project received $ 6.5 million in tax credits from the Montana State Finance Agency.
As a syndicator of these low-income housing tax credit deals, Hunt persuaded investors like commercial banks and insurance companies to bring equity to traditionally capital-poor places. where the need for housing is intense. The Ministry of Housing and Urban Development estimates that there is an immediate need for 68,000 units of new housing in the Indian country.
A “lack of housing”
While mission-driven non-profit developers have been active in the Indian LIHTC market, for-profit companies interested in indigenous housing remain relatively scarce.
Dana Mayo, Executive Managing Director of Hunt Capital, took an interest in Indian housing in a previous position at SunAmerica and brought that with him to Hunt Capital, the syndication unit of Hunt Companies.
“I did a number of them. I have been involved for some time ”, said Mayo.
The agreements with the Hunt Capital Indians are mostly for new construction, Mayo said, but also include four rehabilitation projects. “There is a shortage of housing there” he explained. “What there is a tendency to not be well maintained and of inferior quality.”
Working in an Indian country offers “a good social purpose” as well as features like investors, including straightforward deals and substantial guarantees of rent subsidies from tribes in case their members are in arrears, Mayo said. .
Although these are affordable housing projects (the LIHTC program states that tenants earn no more than 60% of the median income in the area), investors generally do not invest in earning Community Reinvestment Act credits. . These rural and remote locations are often not in their CRA mandated service areas. The call is rather than “These are generally safe offers”, said Mayo. “The tribes involved are heavily invested. “
Make it happen
Many agreements have Housing Assistance Program (HAP) contracts between the tribes and the partnership to secure the rent subsidies. And some states (LIHTC is administered by state housing finance agencies) have booked tribal housing projects, which is helping to increase the volume of transactions.
Land issues are simplified by the fact that tribes tend to already control the land that is to be developed. (Technically, the federal government owns reserve land but holds it “in trust” for tribes and individual Indians.) Agreements are structured as partnerships, with the tribes as developers and owners / managers.
Typically, there is no hard debt involved. Instead, the money comes from two sources: LIHTC equity raised by Hunt Capital and tribal housing funds, according to Mayo.
Usually, investors are part of a multi-investor group. But in a few cases, JP Morgan Chase was the sole investor. Hunt uses Kutak Rock, a firm with extensive Indian country experience, as legal counsel to assist with underwriting.
Other implication
Hunt isn’t the only one playing in this sandbox. In 10 of the 12 deals, Hunt Capital partnered with Travois Inc., a pioneer company with private involvement in Indian housing. Mayo first became involved in SunAmerica’s business when Travois was working to increase the limited number of investors in the field. Now he continued the relationship at Hunt Capital.
Travois, based in Kansas City, Missouri, is a housing consultant who has been involved in more than 190 Native American housing projects, raising more than $ 675 million in equity since its inception in 1995 by David Bland. Bland’s daughter, Elizabeth Bland Glynn, is now the owner and general manager.
Travois offers a long list of tribal services, including project design, environmental services, and advice on economic development and asset management. In addition to its Indigenous economic development portfolio, it has participated in $ 1.4 billion in projects using $ 750 million in investor equity (Travois is also involved in newcomer tax credit agreements. markets).
Mayo praised Travois’ work in the Indian country, calling the group “the most experienced group in the industry” and one of the few for-profit in the space. “It’s not a deep bench. We don’t see a ton of competition ”, he said. “Travois is doing a very good job.
One of the reasons for its success is that “Travois respects tribal sovereignty”, said Mayo. This includes the jurisdiction of tribal courts, a sticking point for many non-Indian businesses. Tribes also enjoy sovereign immunity, which limits prosecution unless the tribe waives that immunity.
James Crowder, senior director of project management at Hunt Capital, detailed some of the projects he has been involved in. Not all of them are as remote and inhospitable as Fort Peck and Rocky Boy.
In Tolowa Dee-ni ‘Nation in northern California, for example, the 21 affordable housing units are built on the shores of the Pacific Ocean. That deal used $ 8.8 million in LIHTC and the federal solar energy tax credit, as well as $ 4.05 million put in place by the tribe to build permanent funding.
It will include picnic areas and a playground, a community center and a business center.
The ocean views at Tolowa Dee-ni ‘, which is in Smith River, Calif., May well correspond to a recent development by the Yurok tribe. Also in northern California, it has energy-efficient housing located in the middle of the ultra-scenic Redwood National Park, Crowder said.
Woo-Mehl. Image courtesy of Hunt Capital Partners
The 17 units there, in a project called Woo-Mehl LIHTC Homes, are slated for completion in 2022 and are Hunt Capital’s latest Indian housing deal. There will be both new construction and rehabilitation at two adjacent sites in Weitchpec, Calif., Approximately 75 miles northeast of Eureka. The project includes a quadruple as well as single-family rentals.
The units range from two to four bedrooms and are reserved for tribal members earning up to 30, 40 and 60 percent of the median adjusted income for the area.
The tribe has pledged to provide up to $ 650 per unit per month to cover the operating costs of the project. The total cost of the project is $ 10 million, of which $ 6.7 million is from tax and solar credits and the balance from the tribe.
Construction can be a real challenge in places with winters as severe as Montana’s reservations, Crowder said. At Fort Peck, for example, where modular construction was used, the units were built so tight against the cold that the indoor air was not properly cooled and the design had to be redone. Otherwise, they turned out to be “magnificent units,” he said. “They look great, they are very efficient, just what you need for the climate. “
In addition to providing much-needed affordable housing, these projects also provide jobs for tribal members. Crowder said Rocky Boy was particularly remote, with a two-and-a-half-hour commute required to get building materials. “Ninety-five percent of the project was carried out by members of the tribe ”, he said.
“These are labors of love” Mayo agreed. “The (tribal) housing authorities have put their heart and soul into making these deals. “
Crowder, meanwhile, has a caveat to anyone considering such projects: they tend to be small and long, he said, noting that a 24-unit development can take up to 18 months, from start. at the end.
“You have to be patient,” he said. “They won’t happen overnight.
Editor’s Note: Mark Fogarty also contributed to this story.
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