Car Finance with Bad Credit: How to Get Approved

There are lenders who specialise in providing car finance for people with poor credit scores, and there are steps you can take to improve your chances of getting approved. In this article, we will explain what bad credit car finance is, how it works, and how you can get the best deal possible.

What is bad credit car finance?

Bad credit car finance is a type of car finance that is designed for people who have a low credit score or a history of missed payments, defaults, CCJs, or bankruptcy. Having a bad credit rating can make it harder to get approved for car finance, as lenders may see you as a higher risk of defaulting on your repayments. However, this does not mean that you cannot get car finance at all. There are lenders who cater to people with bad credit, and they may offer you a car finance deal with a higher interest rate, a lower loan amount, or a shorter loan term.

How does bad credit car finance work?

Bad credit car finance works in a similar way to regular car finance, except that the lender will take into account your credit history and your current financial situation when deciding whether to approve you or not. You will need to provide some personal and financial details, such as your income, expenses, employment status, and bank statements. The lender will also check your credit report and score, which will show your past and present credit accounts, your payment history, and any negative marks, such as late payments, defaults, or CCJs.

The lender will use this information to assess your affordability and your creditworthiness, and to determine the interest rate, the loan amount, and the loan term that they are willing to offer you. The interest rate is the percentage of the loan that you will pay in addition to the principal amount. The loan amount is the total sum of money that you will borrow to buy the car. The loan term is the duration of the loan, usually expressed in months or years.

The interest rate, the loan amount, and the loan term will affect the monthly repayments that you will have to make to the lender. The monthly repayments are the fixed amount of money that you will pay every month until you have paid off the loan in full. The monthly repayments will also include any fees or charges that the lender may apply, such as an arrangement fee, an administration fee, or a late payment fee.

How to get the best deal on bad credit car finance?

If you have a bad credit score, you may have to pay a higher interest rate and accept a lower loan amount or a shorter loan term than someone with a good credit score. However, this does not mean that you have to settle for a bad deal. There are ways that you can improve your chances of getting approved for car finance and get a better deal, such as:

• Check your eligibility before applying. You can use our application form to see if you are likely to get approved for car finance without affecting your credit score. These tools will ask you some basic questions and perform a soft credit check, which will not leave a footprint on your credit report. They will then show you a list of car finance deals that you are pre-qualified for, along with the interest rate, the loan amount, and the loan term. You can then choose the best deal for you and apply with confidence.
• Improve your credit score. You can improve your credit score by taking some simple steps, such as paying your bills on time, paying off your existing debts, keeping your credit utilisation low, checking your credit report for errors, and registering on the electoral roll. Improving your credit score will not only increase your chances of getting approved for car finance, but also help you get a lower interest rate and a higher loan amount.
• Save up for a deposit. A deposit is a lump sum of money that you pay upfront when you buy a car on finance. A deposit will reduce the amount of money that you need to borrow, which will lower your monthly repayments and your interest charges. A deposit will also show the lender that you are serious about buying the car and that you have some savings to fall back on in case of financial difficulties. A deposit can be anything from 10% to 50% of the car’s value, depending on the lender and the deal.
• Choose a cheaper or newer car. The price and the age of the car that you want to buy will affect the cost and the availability of car finance. A cheaper car will cost less to finance, which will lower your monthly repayments and your interest charges. A newer car will have a higher resale value, which will reduce the risk of negative equity, which is when you owe more on the car than it is worth. A newer car will also be more reliable and fuel-efficient, which will save you money on maintenance and running costs.

Conclusion

Getting car finance with bad credit is possible, but you may have to pay a higher interest rate and accept a lower loan amount or a shorter loan term than someone with a good credit score. However, you can improve your chances of getting approved and get a better deal by comparing different lenders and deals, checking your eligibility before applying, improving your credit score, saving up for a deposit, and choosing a cheaper or newer car. By following these tips, you can get the car that you need and afford without breaking the bank.