Published: 31/01/2022
Bad credit car finance is a type of loan available to those who have a poor credit history and have been unable to borrow elsewhere. There are three types of car finance. Hire purchase, Personal contract purchase and personal loans.
Spreading payments over a period of time is a great way to fund your next car if you can’t pay for a car in one go. Like any type of loan, interest rates will apply so compare providers to get the best deal for you.
If you’ve a poor credit rating, or simply no credit at all, it can be difficult to get car finance approved. But you do have some options. 1Plus1 guarantor loans will consider an application, subject to affordability of you and a guarantor. Buying a car with cash may help you secure a better deal.
You may have a “bad” credit score, but what does “bad” actually look like and how can you improve it? You can use a number of agencies to get a free report.
This should tell you about any credit, missed payments and people who are financially linked to you and is a good place to start. Ensure your details are correct and up-to-date. It helps when lenders do credit checks, and it’ll also reduce the risk of fraud.
Simply, your credit rating is a score that reflects how good a borrower you are in the eyes of lenders, who never see this score – all they can see is your credit history, that gives them an picture of how good you are at managing your credit.
Those with a poor credit history often pay higher interest rates or are offered poorer lending options. Lenders may refuse to lend to you altogether. Fortunately, there are ways you can improve your score improving your chances of getting car finance. This has the best long-term benefit.
With finance deals like hire purchase or personal contract purchase, you’re normally asked to put down a deposit. This can be around 10%, but it’ll vary depending on what car you’re after. If you can put a little more money down at this stage it may boost the lender’s confidence in your ability to make repayments and may get you a better interest rate for you.
Some companies specialise in loans for people with bad credit. There are drawbacks to this. Interest rates can be comparatively high. One alternative is a guarantor loan, where you get someone who trusts you to act as your guarantor.
This poses less of a risk to lenders and so tends to offer better interest rates than short-term loan companies. It’s not 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.
1Plus1 offer personal loans backed by a guarantor, subject to both the borrower and guarantor meeting our affordability and credit worthiness criteria.
If you think you may be interested in a 1Plus1 Loan, please give us a call on 0330 1200 313 and one of our friendly staff will be more than happy to discuss the process with you, or start your application here.