It is pretty hard to get a car loan if your credit condition is bad. You don’t exactly have a lot of options, but it is most definitely not impossible.
Let’s first discuss the impact of finance on your chances to get a car loan. A credit score is a clear reflection of how honest of a borrower you are. It rates your credibility. Lenders are only able to access your credit history. They will judge you on how good you are at keeping a track of your finances. People with poor credit history usually are only offered loans with a very high-interest profile. And sometimes they are not even considered to be a candidate for a loan.
However, we have compiled some options that might help you with your car finance.
Improve your credit rating
The best way to ask for a loan is this. Improving your credit score is the most time-consuming option in this list but it proves to be the most beneficial in the long term.
This will be a good way to ensure the lenders that you are reliable. And will help you score a better deal with good rates.
Get a credit report
So you may know that your credit history is bad. But what exactly is the definition of “bad”?
Check with a credit check portal to get an insight into your credit score. This will help you sort out any ongoing credits, payments that are not yet completed and people who are connected to you financially.
Also, check to see if all your contacts and details are updated. This helps decrease the threat of fraud.
Register on the electoral roll
When moneylenders run credit checks, they first look for your residence and name. If you are registered on the electoral roll, it makes it easy for them to track you. This decreases the threat of fraud.
Sever ties with those who have bad credit
Deadweight drags you down. Get rid of all joint accounts that have bad credit history partners. The black dot next to their name is taking you down with it. The legal way to cut financial relations is to get a notice of disassociation. When all the checks have been performed, this person will be eliminated from your files.
Pay debts off in a timely fashion
Having ongoing debts isn’t going to help you when you are asking for more money. Keep a track of all your repayments and pay them promptly. It gives off the impression that you are a trusted person and it will also help you with the number one option in our list. Thumb rule is to stay under 75% of your credit limit. If you are continuously touching the end line, it means that you are not good at managing the numbers.
Also, keep a check on all the late payments. Keep your money in check by not spending too much and show that you can be trusted with money.
All of the above options are time-consuming. But if you don’t have a lot of time, here are a few options that you can consider:
Increase your deposit
Finance agreements usually ask for a 10% down payment. It is different for every deal but this is the standard. You might want to consider putting down a little bit more deposit that what the deal is asking for. This will help the lender be more confident in you. And this will ensure that you will be consistent with repayments. This might help you get a better interest rate as well.
Unsecured guarantor loans
A huge number of companies are offering loans to individuals with bad credit. But the only downside of these companies is the high-interest rate. A substitute to them is a guarantor loan. Here you are assigned a person who is supposed to be your guarantor. This person is like a second in line to pay your loans, if you are not able to for whatever reason.
This process is a better option for moneylenders and that is the reason why they offer better interest deals in this method. But this needs to be thought of properly before making a decision. Acting as a guarantor is a huge responsibility. Both of the parties can be issued a legal notice if you both fail to pay off the debt. It is important to keep in mind that you should not go into more debt than you can pay off. A new car is not worth the hassle.
Consult a finance professional to help you with the situation.