Having access to your own car to get you from A to B is preferred for many of us and makes our lives easier in a range of ways. Car finance is used as an alternative to buying a car outright – this can be costly and many of us don’t have the funds for this to be a viable option. But what if you’ve struggled to be approved for loans in the past due to a low credit score? Don’t worry, car finance bad credit can offer finance options so you can still benefit from a new car, no matter your financial situation. Read on as we take a closer look at how to get car finance with bad credit.
The benefits of car finance
Car finance is one of the most popular ways of having access to a new car when you don’t have the funds to pay for it outright. And with a range of options available, you can choose an agreement that suits you perfectly. Whether you’re looking for a hire purchase, whereby you pay for your car monthly and finally own it when you make the last payment, or you’re looking for a PCP agreement which allows you to take a loan out to purchase the car, which you pay back monthly, and you can either choose to buy or swap the car for a newer model at the end of the term, there are flexible financial agreements to suit everyone. Here are a few of the most notable benefits:
- Fixed payments: Once you’ve been approved for finance, your monthly payments will not change. You simply have to decide how much you can pay monthly, and the length of the term you’d like to pay your finance off, and you’re all set. No sneaky increases or hidden fees.
- No lump sum: Cars are expensive and generally, most of us don’t have a lump sum to spend. You may need a small deposit depending on your lender, but that’s it! You can keep your savings for other important life events.
- Build your credit score: Making more manageable monthly payments towards your car finance will allow you to build up your credit score, which will make you more likely to be approved for finance in the future. This brings us to our next point…
Approval with a bad credit score
A low credit score makes it more difficult to be approved for a loan as lenders see you as a risk. However, this doesn’t necessarily mean you won’t be accepted for car finance. Some lenders base their decisions on affordability, rather than how you’ve paid your bills in the past. If you can prove you can afford the finance agreement – by supplying bank statements or evidence of a stable income – there are lenders that will approve you for car finance. Make sure you work out how much you’re able to pay each month and choose a car that accommodates your budget so you can benefit from approval, and the ability to boost your credit score.
How to improve your chances
If you’re feeling apprehensive around applying for car finance due to a low credit score, here are a few ways in which you can improve your chances of approval, so you can drive away in your new car.
- Find an appropriate lender: As mentioned above, make sure you look for a lender that works with those that have less-than-perfect credit. If you choose an affordable model that you know you can meet the monthly repayments for, a bad credit lender will be more likely to approve your application. You can research lenders online easily to see which suits you best.
- Pay off outstanding debt: If you’re thinking about buying a car on finance in the coming months, make sure you make the effort to pay off any outstanding debt that may be having an effect on your score. This will show lenders you’re making an effort to improve your situation and will make your application look more trustworthy. And of course, this stands you in a better position for future financial help.
- Check your credit score for mistakes: Did you know something as small as a misspelt name or address can bring down your credit score? Request a copy of your report to ensure there are no anomalies that may be causing your credit score to be lower than it should be and have this corrected.
- Save for a deposit: Whilst you might not need a deposit when buying your car on finance, it can actually help with approval. It shows lenders that you’re committed to your agreement and reduces the loan amount they need to provide, therefore making it more likely you’ll be approved.
Just because you have a low credit score, this doesn’t mean you won’t be approved for car finance. By taking steps to improve your position, and choosing a lender that considers bad credit applications, you’ll be well on your way to driving away in your new car.