Need Car Finance, But Have Bad Credit?

The age-old problem with money is having enough and having to borrow when things get tricky. If you are hoping to purchase a new car but will need finance to do so, and you know you have a bad credit rating you might feel stuck entirely, but there are a few things you can do to improve your chances of being accepted for a loan.

Applying for a Loan
The first thing that any company will do when you apply for a loan is to check your credit score to see if you are eligible for a loan. A poor credit score can mean you are refused or be offered a loan with a ridiculously high-interest term which makes it really expensive and will cause more damage in the long run. Your credit score is negatively impacted by things like missed or late payments on other credit agreements, your phone bill, your credit card etc. If you have been declared bankrupt, this also leaves a negative mark on your credit score so what can you do?

Keep Repayments on Time
Whatever debts you currently have it is vital you make payments in a timely manner. Lenders need to see trust and be convinced that you will pay them back the money within the terms. People with a good credit score will be offered more favourable interest rates as they are seen as a lower risk. It takes time to improve on past mistakes, but it can be done. You can request a copy of your credit file to see what is recorded and check that nothing is there in error, but ultimately you will have to accept that damage in the past can follow you for quite some time until you can repair it. It is vital that you budget well and make sure you can afford the payments, there is no point playing the round-robin game where someone gets left unpaid as you try desperately to keep every creditor happy. It might not be your dream car, but if you are struggling, you may need to pick practicality over perfection and choose something cheaper that gets the job done.

Pay More Deposit
If you can offer more in the way of a deposit, you will increase the chances of securing a loan. It is all about risk; if you fail to keep up payments then the company can take the car as the asset and sell it, the more you have already paid off the easier it will be for them to sell to get the rest of their money back.

Use a Guarantor
If you are really struggling, you might find that a guarantor loan is worth applying for. This is basically a loan with a second person who consents to become responsible for the loan if you fail to keep up the repayments. The person who acts as a guarantor will need to have a good credit score, and they will obviously need to trust you, parents are often used in this situation.


  1. Cheers - always good to know

  2. Thanks, good to keep in mind

  3. We always save up to buy things, even cars. But if that is not possible, this is good advice.

  4. some really important points to consider! So important to keep on top of payments