For many car owners, having these machines is more of a necessity than a luxury. The reasons vary, ranging from work purposes, geographical circumstances, health concerns, and more. However, not all of us have the money to purchase a vehicle, and even the idea of going for car finance seems unnerving.
Your credit history might not be as pristine as you wish, which can impact your chances of acquiring your dream car on finance. A poor credit score can see lenders offering you a high-interest rate, refusing to lend you money, or offering you a lower amount.
A bad credit history dents your chances of getting car financing, however there are bad credit car finance options. You have other viable options, which might be few and slightly costly, but can be an opportunity for you to finance the vehicles you need.
First, Review Your Credit Report
It would help if you did your homework; research to understand what you are dealing with. Go through your credit report to see if there are any stains. Take note of issues such as incorrect information, which can impact your credit score negatively. And it is best to find elaborate ways to fix these black spots in your credit report.
You can get a copy of your credit report for £2 from any of the leading three credit-reference agencies in Britain – Experian, Callcredit, and Equifax.
You might get a free copy if you sign up for a free trial. However, keep in mind that you must cancel your subscription at the end of the 30-day introductory period, lest you find yourself paying a monthly fee. We would like to point out that canceling these subscriptions might be challenging and costly. Hence, exercise some caution when signing up by setting a reminder.
What To Watch Out For
Your current and previous financial account details, the available credit you can access when you last applied for credit, and your record of paying off debts, are some of the elements you must watch out for in your credit report.
Also, check your address details to ensure the previous ones are correct. A mistyped postcode could stain your report.
How To Improve Your Credit Rating
We can confidently say that having a less than desirable credit report is not the end of your dream of owning a car. You can turn things around with time. For instance, you can revise how you utilize credit cards. Ensure you pay off the amount you used to pay for the new laptop or fund your holiday.
However, you can accomplish this easily if you also change your spending habits to ensure you accrue what you can pay off. Having open and unused credit accounts can also have a negative impact. Therefore, close them and remain with what you need.
Also, consider registering for the electoral roll. It can improve your credit score and make it easier for lenders to identify you.
Furthermore, be prudent about your applications for things like mobile phones, loans, and credit cards within short periods. Multiple applications give a bad impression and can impact your score negatively.
So, My Credit Score Is Poor, But I Need A Car. What Now?
People who urgently need a vehicle cannot settle for holding off on such a goal because of a less desirable credit score. Yes, holding off makes financial sense, especially if you do not cannot find competitive rates. But on the other hand, you must contend with pressing needs that you are confident will be addressed more effectively if you have a car. It is a predicament that requires lengthy deliberation with yourself to determine which need surpasses the other.
Nevertheless, you can improve your position by increasing your deposit when applying for a car finance loan. Most creditors require a 10% down payment as a minimum. If borrowers can meet this requirement, things might work in their favor by making the lender feel confident about their ability to repay the debt without defaulting.
It could see you get competitive interest rates, which might be cheaper. It also could be the difference between a loan application being rejected or approved.
The situation might push you to consider searching for dealers specializing in loans for individuals with bad credit. However, it will quickly be a costly mistake because such lenders have exorbitantly high-interest rates that will see you paying more than the average standard. You also might pay off the debt within the agreed time.
People with bad credit can consider a guarantor loan, which requires them to find someone trustworthy to vouch for them as their guarantor. The guarantor shoulders the debits if the borrower cannot make repayments or defaults on the loan.
Most lenders will consider this option because it has less risk, and some might even consider offering more competitive interest rates. Nonetheless, guarantor loans can also be problematic when the guarantor cannot also shoulder the debt. In such a scenario, the borrower and the guarantor are held legally responsible.
The Verdict
• Revise your spending habits when you have less than a desirable credit score to avoid taking on more debt than you can afford.
• Reconsider all your options if you are struggling with finding the money to buy a new car.
• Go for a cheaper vehicle if the finances cannot allow you to pick what you desire, or wait until you get the amount without sinking yourself into unmanageable debt.