Just because you can’t afford to buy a car outright, it doesn’t mean that you can’t get one at all. There are various avenues to car ownership and one of the best is car finance. Many people think that they are excluded from this route because of their bad credit rating or because they have been refused car finance in the past. If that’s you, let us explain why car finance should still be available to you. First of all, we’ll cover the basics, in case you aren’t aware of them – the world of credit and financing can be a complicated one.
WHAT IS A CREDIT SCORE?
Your credit history is basically a record of all of your debts and whether or not you have repaid them. It comes from a number of different sources, like credit card companies and banks. This credit history is used to calculate a score that describes how likely it is that you will pay off future debts. This is called your credit score and will affect your ability to do things like borrow money or, in this case, get car finance. You can be approved or denied car finance, and this depends how good or bad your credit score is.
WHY DO I HAVE BAD CREDIT?
The things listed below will all have a negative impact on your credit score and will result in bad credit. These are recorded in your credit history, as mentioned above.
- Missed Payments – When you borrow money and make a late payment or miss a payment altogether. This increases your bad credit risk, but you will still be able to get car finance.
- Defaults – When missed payments, or not paying at all, means you fail to meet the legal obligations of a finance agreement. A default will remain in your credit history for 6 years and means you will not be able to borrow from most banks and lenders, but you will still be able to apply for car finance.
- County Court Judgements (CCJs) – When you have failed to keep up with payments, a CCJ allows debt collectors to come to your property. Again, you can still apply for car finance even if you have a CCJ.
- Bankruptcy – When you have been declared bankrupt (officially unable to pay back your debts), you will not be able to apply for credit. This is the worst-case scenario and means that even bad credit specialists can’t help you secure a car finance deal.
WHAT IS CAR FINANCE?
This is when you secure a loan in order to buy a car. You pay a deposit and then make fixed monthly payments over a set period of time. Both of these things are agreed with a lender beforehand. When all of your payments have been made, you own the car. It is a more affordable and manageable way to buy a car. It means that many people who could not otherwise get a car are able to. Your credit score determines whether or not you can enter into a car finance deal, as well as how much deposit you pay, how much the monthly payments are and how much you can borrow in total. That, of course, determines what type of car you can have or if you can have one at all. This also varies from lender to lender.
CAN I GET CAR FINANCE WITH BAD CREDIT?
Yes. The good news is that you can get car finance even if you have a bad credit score. The ability to get a car should be available to everyone, even those who have bad credit. Nowadays, there are many options available and specialists who can help people in this situation, even if you have missed payments, defaults or CCJs. What matters is that you can make the car finance payments going forward. If you are unable to, you might be able to get guarantor car finance, which means that somebody else promises to make the payments that you miss. Bad credit car finance works just like any other type of car finance – your current situation is taken into account, a realistic deposit and repayment plan is calculated, and an appropriate lender is selected.
There are some basic criteria that everyone has to meet, regardless of the quality of your credit score. You need to:
- prove affordability,
- be 18 or older,
- have lived in the UK for more than 3 years,
- hold a full UK driving licence
Unfortunately, if you are bankrupt, you will be unable to secure a car finance deal.