Purchasing a new, or even a used, car usually requires some form of credit. Few of us have the money on hand to pay cash for a car. Those that do have those resources still rely on credit for large purchases like cars and motorbikes because it keeps their credit profile active and helps build a positive credit history.
Still, if your credit history is in a bad way you may find it difficult to qualify for the online loans you need to make your purchase. Conventional lenders tend to shy away from bad credit borrowers, particularly when it comes to big ticket items like cars.
But a bad credit report doesn’t necessarily have to put an end of your search for a ride. Even with an adverse credit history you still have options and opportunities.
Bad credit borrowers start at a disadvantage, particularly when it comes to securing credit for large purchases like a car. Ideally, your first move toward financing your purchase would be to work on boosting your credit rating. Of course this takes time and depending on your need you might not be in a position to postpone your purchase.
Still, there are other ways to increase your financing opportunities. For example, you might consider offering to put forward a deposit when applying for your car loan. Deposits aren’t always required for bad credit loans but they can help to reduce the overall costs. That, in itself, will help reduce the size of your monthly payments and make your car loan more affordable.
Putting forward a deposit also shows potential lenders that you know how to manage your finances and you’re currently earning enough to put money into your savings. These are powerful indicators of your creditworthiness and can help sway a loan approval in your favour.
You should also think about the total cost of the vehicle you want to purchase. Not just the sticker price but the cost of operating the vehicle over time. Fuel, insurance, taxes and MOT all add up and can have an impact on whether or not you can afford the car over a long term. In short, if the operating costs of the car are going to put a strain on your finances it will be difficult to convince a lender that you can afford your loan.
Your credit history is a snapshot of your financial past. It is used to assess your overall credit worthiness and financial stability. Many things can contribute to a poor credit rating. Even a lack of past credit can be counted against your score. This is a problem that tends to impact younger borrowers and new arrivals to the UK who are looking to secure loans or lines of credit.
The most common causes of a bad credit rating include:
One thing to keep in mind is applying for credit also has a direct impact on your credit score. Every hard credit check costs you points. If you have a history of applying for credit cards and being denied or applying for loans without qualifying, that can will damage your credit score.
There is no single credit rating metric that is considered bad or poor. In the UK we have three credit reference agencies, each with its own scale –
The lower your score on these scales the worse your credit rating. Points are often easier to lose than they are to recover. However, every on-time payment and every discharged loan improves your credit rating and increases your credit options.
If you are unsure about your current credit rating you can check your score at any time. All UK residents are able to monitor their credit histories free of charge.
If you are currently struggling with bad credit and are looking to secure a loan for a new or used car there are a few options to consider. While these loan products are broadly similar they do have some distinct differences.
However, in the event the principle borrower fails to make their payments on time and in full the co-signer (or guarantor) assumes full responsibility for the loan. In most cases guarantors on bad credit loans are family members, friends, or work colleagues.
Every loan comes with some degree of risk attached. Bad credit loans are no different. The majority of lending products for people with poor credit are designed to serve short-term financial needs. Urgent loans, payday loans and even small personal loans are meant to be repaid in short order.
Car loans for bad credit borrowers are different. You are financing a larger purchase and will be committing to a more expensive loan with longer repayment terms. All bad credit loans are dependent on your current income as well as your predicted expenditures. A sudden unexpected expense could derail your budget, making it more difficult to manage your loan. With or without a guarantor that can put your financial future in jeopardy.
But there is one distinct advantage to securing a bad credit loan for the purchase of a new car. Aside from the obvious access to new and more reliable transportation you have the opportunity to work on your credit score. With every on-time payment you improve your credit rating. Successfully discharging your car loan will go a long way towards rehabilitating your credit history.
At Bad Credit Loans we aim to keep our application process as quick and easy as possible. If you are currently struggling with bad credit and are looking to secure a car loan you can apply using our online application form. Naturally, we will need to collect some information before we can begin to assess your creditworthiness and fully process your application.
In addition to checking your current credit rating we will need the following information:
Additional information may be needed to complete your application process. It is always advisable to keep yourself available to answer any questions lenders may have. Because car loans typically involve significant sums of money the approval time may take longer than other short-term bad credit loans. We endeavour to make the application approval process as quick and painless as possible.
If you have an adverse credit history and are in the market for a new car a bad credit car loan may be the answer. However, as with all loans it is important to understand your responsibilities as a borrower before committing to any agreement.
Bad credit loans can offer you the financial flexibility you need, but they are not to be entered into lightly. Interest rates may need to be higher than other conventional loans to offset the risks taken by your lender and the repayment terms will be highly structured to help you keep on track. But securing the right bad credit car loan can not only put you behind the wheel of a new ride, it can also start you on your way to building a stronger credit profile.