How to Get Bad Credit Used Car Finance
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Even if you have bad credit, there are still opportunities for you to get a competitive car finance deal. Not having a high credit score doesn’t have to hold you back as there are finance lenders out there who specifically work to help get people with bad credit a great finance deal on their next car.
Types of bad credit car finance
Personal Contract Purchase - PCP
If you’re looking at getting a newer model of car, personal contract purchase will probably be the choice of finance to go for.
Instead of paying for the full value of the car as you would with a hire purchase car finance agreement, you only pay for the depreciation (the difference between the purchase cost of the car and the estimated value when you come to give the car back). However because of this, they are cheaper initially, but costly towards the end.
Hire Purchase - HP
With a hire purchase agreement, you’re more likely to get accepted as the lender is able to reclaim the car if you miss your monthly repayments. You also have the added benefit of owning the car outright at the end of the agreement.
Unsecured Loans
With this type of finance option, the lender doesn’t own the car during the term of the loan. This presents a higher risk to them, especially if you have poor credit history, as if you miss repayments they can’t claim back the car. As a result, you’re less likely to get offered this type of finance. Examples of an unsecured loan are a personal loan you get from a bank or building society.
Secured Loans
A secured loan uses one of your personal effects as collateral, for example your house. You’re more likely to get accepted for this type of finance as it shows lenders you’re serious about making your repayments on time, as if you don’t make them, the lender could take reposses one of your personal effects.
Guarantor Loans
A guarantor loan is where a friend, relative or partner is listed alongside you on the finance plan, and if you fail to make repayments, they default back to them.
How can I improve my chances of getting car finance with a bad credit score?
You can increase your chances of being accepted even more by improving your credit score. Having a better credit score will not only improve your chances of being accepted for a car finance loan, but also give you access to lower interest rates. Here are a few ways you can improve your credit score, or build credit if you don’t have a credit history.
-Don’t submit too many applications at once
Too many finance applications, or hard searches, can negatively impact your credit score. Credit checks are ok, as these are usually considered soft searches, meaning they aren’t visible to potential lenders.
-Register on the electoral roll
This is a simple and straightforward one. When you apply, it allows lenders to cross-reference your address and name to ensure that all of your information is correct and that no fraud is taking place.
-Keep up with repayments
Those with good credit scores regularly make their repayments on time, so this is what you should aim for. It can be difficult, but it’s important to set up monthly direct debits if you can so you don’t forget to pay.
-Cut ties with those who have bad credit
For example if you have a joint bank account with a partner who has bad credit, this could be negatively impacting your credit score, so disassociate yourself if you can.
How Essex Car Company can help you get bad credit car finance
If you’re looking for bad credit car finance help in Essex we can bring you offers from a wide range of lenders across the car finance market. Many of them are experts in assisting people with bad credit to obtain car financing. Get a free finance check on our site today to see whether you're eligible before submitting an application, or contact our experts to discuss your bad credit car finance possibilities.