How to Get a Car Finance Deal with Bad Credit


Your credit rating is a crucial factor to finance a car. As long as you have money to pay outright, you do not need to have a fear of your impaired credit standing, but this is a serious concern when you are looking to fund it.

You all know that there are predominantly types of car financing options – personal loans, hire purchase, and personal contract purchase. If you finance your car with either hire purchase or personal contract purchase, you will have to arrange a deposit size depending on the policy of the car dealer, which more often than not is at least 10%.

Arranging the higher deposit size can lower down the cost of the loan. However, these options are not available if you have a poor credit report. Does it mean that you cannot buy your dream car? No, definitely not.

There is still a chance to finance your car, but the first thing is to analyse your creditworthiness.

Your credit report may be disappointing even if you miss one single repayment, but it will not have an adverse effect as long as you have a full-time job or a business.

Poor credit rating accounts for rejection in your application when it is due to the following reasons:

  • Your mortgage is in arrears.
  • You are unemployed.
  • You work part-time.
  • You have multiple defaults on your credit file.
  • Your credit score is very poor.
  • You are bankrupt or have a CCJ issued against you.

One or two missed repayments do not result in rejection, and hence you can get bad credit car finance deals without any hindrances.  

Shop around

You must research before jumping to a deal so that you are not caught off the guard. There is a variety of lenders offering bad credit auto loans. Do not keep yourself to only one lender. Make sure that you research about APRs, term and interest rates.

Even two people with an identical credit rating cannot get the same deal because of other factors considered by a lender like your current financial condition, the car you are buying, and the size of down payment you have.

Sometimes even if your credit score is below the satisfactory level, you will get a better deal if your current financial condition is excellent.

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Consider a larger deposit size

A direct lender can put aside your blemished credit report if you make a larger down payment. Another benefit of a more significant deposit size is you will make smaller monthly payments in case of hire purchase, and the total cost of the loan will be less.

If you sign a personal purchase contract, monthly instalments will shrink further. It is more manageable than hire purchase, but you will have to make a balloon payment at the end of the contract to own the car.

A guarantor can be an additional benefit

Interest rates are likely to be higher due to poor credit rating, but you can negotiate with your lender if you arrange a guarantor with a good credit standing.

It lowers down the risk of the lender because they can call upon the guarantor to make payment when you fail to do so. You can get the loan at better interest rates if a guarantor enters the contract along with you.

Take out a personal loan

In case of bad credit, you may not be eligible for hire purchase or personal contract purchase. You do not need to be dejected as you can take out a personal loan.

Getting private loans with less-than-perfect credit score is more comfortable, and you do not need to put anything as collateral, nor need you to arrange a guarantor.

A personal loan can be expensive if your credit rating is less-than-ideal, but you can manage to get a better deal by arranging a larger deposit size and proving your lender that you will not make a default.

Look out for your affordability

Though you can get a good deal despite a bad credit rating, make sure that you have a repaying capacity. Monthly repayments may seem to be affordable at the time of clinching the deal, but afterwards, the amount begins to look beyond your affordability. 

Make sure that you are sure if you want to buy a used car or a new car. If the new vehicle is out of your budget, you should start looking for an old car. The pricing of such cars will be lower than the former, and hence you will be able to manage repayments.

Though bad credit car financing deals are available, you should try to improve your credit rating. It can prevent you from paying high interest. Make sure that you choose a lender that offers as a good deal as possible.


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