Car Finance for People with a Poor Credit Rating
Getting Finance for a new car can be a worry if you have a poor credit history especially if your old car is just about on its last legs.
However help may be available …
Looking to buy a car on credit but you have a rather battered credit history?
What does Bad Credit mean?
Getting turned down for car finance because of your credit history can be very disappointing and somewhat embarrassing. Usually you are told that you have a poor credit rating, or that your Credit Score is low, or that there are a few problems in your credit history. But all this does not necessarily mean the end of your dream of buying a new car (by which we mean a new car to you!).
Your Credit Score
Poor Credit Rating, Bad Credit History, Poor Credit Score are all expressions that mean the same thing. They refer to your Credit Score which is calculated from your credit report. The report is made up of filings by companies that have extended credit to you. So this could be a bank that has given you a loan, or your credit card provider, or even a utility company. If you have been late making a payment, for example on your credit card or your electricity bill, then this may appear on your credit history and this will result in a lower credit score.
From this, lenders work out how much of a risk you are. A low credit score suggests that you may have trouble repaying your debts. This means that there is a higher chance that you will not be able to repay any future debt. So with a low credit score, it is likely that you may find it harder to get credit.
Never Borrowed Before
You could also have a low credit score if you’ve never borrowed before. With very little credit history, lenders don’t have much to base their decision upon. They don’t know if you’re a reliable borrower or not, so they are inclined to be cautious when lending.
For all these reasons it is always best to secure the finance for you new car first. This is before actually choosing a car and before doing a deal with a car dealer.
Options that lower the Risk for Lenders
If you’re struggling to get car finance because of your credit history, there are other ways to spread the cost of your new vehicle. These are options that lower the risk of the lender, so they are more likely to accept you even if your credit history is not perfect.
Secured personal loan
A secured personal loan is not specifically a car finance plan, but it can be a good option. Secured loans are guaranteed by something valuable you own. However, the lender is able to take your security away if you miss repayments or secure the debt against an asset, like a house, that you own. Once you have the loan you can use the money to buy your new car you outright.
Guarantor loan
With a guarantor loan, a relative or a friend co-signs the loan. If you miss a payment, or you cannot repay the loan, your guarantor will have promised to make the payment. The guarantor will have been credit-checked by the lender before the loan is agreed. They may even be asked to put up something valuable they own — such as a piece of jewellery or an investment — as security.
Hire purchase agreement
In a hire purchase agreement, you hire the car from your lender while paying the purchase price off in full in monthly instalments. After that, you own the car.
Because the car is your lender’s property during the contract, they can take it away if you miss any payments. This makes it a bit less risky for lenders, so you may have a higher chance of getting accepted than you would with other car finance options.
Non status lease
Some lenders and car dealers offer non status leases. These are specifically for those with a poor credit rating. They are called non status because your credit history is not the main factor in your application. Instead, the lender will look at your circumstances as a whole.
Reasons for refusing Credit
These are the usual reason where people struggle to get finance for their car:
- BANKRUPTCY (DISCHARGED)
- IF YOU ARE IN AN IVA
- CCJs
- MISSED PAYMENTS
- LATE PAYMENTS
- DEFAULTS
- ARREARS
- SELF EMPLOYED
- PART TIME EMPLOYED
- AGENCY WORKER
- MILITARY PERSONNEL
Getting Help
If you have a poor credit rating or if any of the above situations relates to you, there is help.
You may find that you are not offered optimal rates rates which someone with excellent credit history might get. But Car Finance Deals, who have a 98% acceptance for car loans, can find you an option that will suit you.
Tell us the type of car you’re looking for, the monthly budget that you can afford, and we’ll get to work finding the best possible finance approval that suits your circumstances.