This evening I am going to write about getting car finance with bad credit in the UK. This is something I had to do as I also have bad credit. Fortunately there are lenders out there who may be willing to extend credit to you but be warned, the are not cheap!
Usually your best bet is to apply with a car finance broker who can usually find you a lender. As an example, I have personally used Carfinance247 in the past and they did find me a lender. Both of the times I have had bad credit, I have used Carfinance247.
The first time I used them they put my details forward to a company called Moneybarn. I got a reasonable rate of interest and a nice car. The second time around they couldn’t find me a lender but they did forward my details to a few companies.
One of those companies contacted me and arranged a car with finance through a company called Vehicle Trading Group. The downside is the interest is very high, plus they can immobilise the vehicle for non payment.
However when all was said and done I did get finance and at the time a much needed mode of transport.
About Car Finance Brokers
One of the things I found was as they are a broker, my details were submitted to a number of companies. I have noticed a fair few searches on my credit file which isn’t great to be honest. This may further harm your already poor credit rating, especially if there are a lot in a short space of time.
The other issue is that they are a middleman and this can slow things down somewhat. When you are searching for a car finance broker, you should make sure that they can help customers with bad credit before making an application. There’s no point in applying with them if they are unable to help you get credit.
About Bad Credit Car Finance
Sometimes your only option may be to have someone act as a guarantor on your loan. If you can’t find someone who can do this for you then you may be out of luck (at the end of this post there is another possible option).
As discussed previously, the interest rate is very high if you do get approved for finance. Your vehicle may also be fitted with an immobiliser that can be activated should you miss a payment.
With a high interest car loan you can also expect your monthly repayments to be very high. This on top of insurance, maintenance and tax may mean the vehicle isn’t truly affordable to you. When you are asked to list details of your expenses and income you must be accurate in order to avoid problems in the future.
If you think that your financial situation may change for the worse in the near future then you should avoid taking on any extra debt.
Avoid making multiple car finance applications
If you are in the market for a new car but you have bad credit then avoid applying to multiple brokers and lenders at the same time. This could affect your application further down the line when further checks are performed prior to full approval. It will also leave multiple credit searches on your credit report which can also be viewed negatively by future lenders.
Check your Credit Report before applying
Before you apply it is definitely worth checking your credit repot prior to making any applications. A lot of organisations are offering you the chance to view your credit report for free and you should take advantage of this! An example of such an organisation would be Noddle and I personally use them to check my credit report.
The main reason you should check your credit report is so you can see what your lenders are possibly seeing. The reason I say possibly is that Noddle is part of Callcredit and Callcredit are just one of three Credit Reference Agencies in the UK. The other two are called Equifax and Experian. When you apply for credit, one or possibly two of these agencies will be checked for any information they hold about you.
The other two Credit Reference Agencies can also provide you with access to your credit report too just so you know.
One last thing, you should make sure the information contained on your credit report is in fact correct. You would be surprised at how many times a mistake has been made that has affected a customers application for credit.
Another option is to see if you can avoid having to finance a car on credit altogether. Could you possibly sell unwanted items on ebay or Gumtree to raise enough for a cheap old banger? I have said this several times now but getting a car on finance when you have bad credit is expensive. It can be really expensive. The smart move would be to try this instead if possible.
However, I also tried this method and it didn’t work out but sometimes you can be lucky and other times not so lucky. Definitely take someone with you who knows about cars if you can!
Another alternative is bad credit car leasing. Surprisingly when I looked into this it is possible and may work out cheaper depending on your circumstances.
The company I looked into was called Wheels4Sure. The downside was the deposit which can be quite high along with the monthly payments being on par with expensive hire purchase in terms of absolute numbers. The other thing to note is that you don’t own the car at the end of the term but you can upgrade to new car and enter into a new contract.
However you do lease a brand new car so there wouldn’t be any MOT expenses, the car is under warranty and servicing is included for some models on special offer in the price. It is worth considering if you are out of options but also worth weighing up against a finance application on an older car.
Wheels4Sure require that you are working and can afford the monthly repayments. When I looked into this they needed to see my bank statements and wage slips so pretty standard stuff to be honest!
I hope the above has been useful!
Image Credit: Dr Joseph Valks / FreeDigitalPhotos.net