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How to Get Car Finance with a Bad Credit History

Trying to arrange car finance with a poor credit history can be difficult. Because you have experienced credit problems in the past, you will be regarded as a high risk by many lenders who would ordinarily be happy to arrange a car loan.

The good news is that even with a bad credit history, it is possible to get finance to help you buy a car. You may find extra restrictions imposed on your loan but, provided the lender thinks you can afford the repayments, you should be able to borrow the money.

Why have I got a bad credit rating?

There are many reasons why people end up with a bad credit rating. You may have reneged on credit payments in the past or fallen into arrears. You may have a County Court Judgement against you or you may have been declared bankrupt. Surprisingly, if you have never applied for a loan before or don’t have a credit card you may find it difficult to get car finance – having no credit history on record means that lenders have no way of knowing whether you are a good or bad creditor.

All of these financial difficulties put you in the position of being perceived as a risky creditor. Many lenders will not be willing to offer a loan because they fear they won’t get their money back. However, there are specialist lenders willing to take on bad creditors, particularly if they are happy that you can now afford the repayments.

Will I be penalised?

Unfortunately, as a bad creditor in the past any car finance deal offered to you is likely to come with restrictions. There may be a limit to the amount you are allowed to borrow and you are likely to find yourself paying a higher rate of interest than on a standard car finance deal. You may find the lender insists on a secured loan which means that your car finance loan is secured against your home or another valuable asset which you risk losing if you can’t keep up with the repayments.

How can I find car finance with bad credit?

There are many lenders and brokers who will consider financing car loans for people with a poor credit history. A simple Google search will come up with a list of financial businesses, many of which are local rather than UK-wide companies. Make sure the business is registered with the Financial Conduct Authority.

You will need to do plenty of research before deciding which broker or lender to use. Look carefully at the websites and maybe give the company a call to find out more. Look for word of mouth recommendations and perhaps speak to some car dealers – they may be able to recommend a reputable finance company.

Am I guaranteed to get car finance with bad credit?

There are no guarantees – a lender is within his right to refuse your application if he thinks you are a bad risk. However, there are some actions you can take to put yourself in the best position.

Firstly, make sure you’re up to date with any current repayments. If you can demonstrate that you’re in control of your finances now, the lender may be less concerned about your past history. Secondly, offer to pay a deposit. The lender will be happier if he has some money off you already and it shows good faith on your part. Finally, consider making a joint application with your spouse or partner if they have a better credit rating than you as this may increase your chances.

Will applying for bad credit car finance affect my credit rating?

A broker or lender is likely to make two recorded credit searches on you, following an initial “soft” or unrecorded search to see whether it’s worth considering you for finance. Make sure you give as much and as accurate information as possible at the start to minimise the number of credit searches.

Provided you are approved for the car finance deal, it could work in your favour in the future. If you are able to keep up with the repayments and pay off the loan within the agreed time period it should improve your credit rating.

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