Many people find it much harder to get finance for a car with bad credit than for example 4 years ago in the UK. Credit is really tight and people’s credit rating has gone down as well as lenders have changed the criteria for getting accepted for new car loans. Therefore you do have to do your research in order to be able to get a car loan with the best possible conditions and still be able to maintain a sound credit rating.
Getting a car loan is essential in order to be able to live the lifestyle we are used to, get to do what we have to do, go to work, and drop the kids off for school. As unemployment has soared in the UK there are less possibilities to find a job you can commute to by public transport, and you have to compromise. Although if your car is not reliable to use it every day, it is important to change it. Having a car in the UK is not a luxury any more, but a necessity, therefore you might need to look for car loans even if you have bad credit rating.
The options available for you will depend on your credit rating, some types of finance are harder to obtain with bad credit score than others, so the first stop is to get a copy of your credit file. Many things do affect your credit rating, if you live in the UK, financial companies do use almost automatic software to determine if you can get a car loan and don’t really like lending new money for people with bad credit.
1. Personal loans for bad credit
You might want to finally own the car you are buying, therefore you want it to be registered on your name,instead of the finance company’s. But it is a higher risk for the lender, therefore you do have to have a sound credit profile to get an unsecured personal loan for bad credit, also you have to remember that the interest rate might be higher than you are used to. Although many companies do offer personal finance with bad credit rating, you do have to shop around to make sure you will get the best deal available.
2. Hire purchase agreements for bad credit
Many big loan houses and banks do also offer Hire Purchase agreements. These car loans are more suitable for people with bad credit. Also the interest rates are likely to be much lower than on unsecured finance. Although you do have to take into consideration that the car is still going to be owned by the bank until you paid off the last installment of the car loan, you will just become the registered keeper of the vehicle. The other disadvantage of this type of car finance is that the bank can take the car back any time if you do not keep up the repayments.
3. Dealership deals for bad credit
If you take out a finance from a dealer, you have to know that it is still not the car dealer company that is going to offer the finance on the car, but a bank. Car dealers are signed up for schemes with different banks and finance houses to provide car loans on their behalf and earn a commission on the finance. Although it is generally easier to get a car loan from them, you do have to remember to cross-check the prices, many car companies do build in the interest in the price, although offer zero percent credit on loans for people with bad credit.