Bad credit car finance

How to get car finance if you have bad credit?

If you have a poor credit rating, or simply no credit at all, it can be difficult to get a car finance agreement approved. However, you do have some options. Some specialist lenders offer finance to people with bad credit.

How your credit rating impacts your chances at getting a car on finance

In a nutshell, your credit rating is a score that reflects how good of a borrower you are in the eyes of a lender. Lenders never see this score – all they can access is your credit history. This will give them an indication of how good you are at managing your money.

People with a poor credit history may find that lenders offer them higher interest rates or poorer lending options. Some may refuse to lend to you altogether. Fortunately, there are ways you can improve this score over time, increasing your chances of getting car finance. While it can be time-consuming, this has the best long-term benefit.

Have you considered a guarantor loan?

While a number of companies specialise in loans for people with bad credit, there are a few drawbacks to this. The problem with many of these is that interest rates can be comparatively high. One alternative is a guarantor loan, where you get someone who trusts you to act as your guarantor. If you can’t make the repayments for whatever reason, the debt passes to them.

This method poses less of a risk to lenders and so tends to offer better interest rates than short-term loan companies. This isn’t something to go into lightly, as being a guarantor is a hefty responsibility. If the guarantor is unable to shoulder the debt, both you and your guarantor could face legal action. If you’re in doubt, speak to a financial advisor.