Cars, along with mobile phones are one of the most heavily relied upon luxuries today. But unlike phones, cars cost a hell of a lot of money. Learn how to finance a car with bad credit.
Cars are one of life’s greatest conveniences. Particularly in Australia where long-distance drives are so often the norm. For many, a car represents the lifeblood of their business. If your car breaks down and needs replacing you want to be able to arrange it quickly and easily. Maybe you’re simply ready for an upgrade. In either circumstance car finance is often the answer. However, if you have a poor financial history, understanding how to finance a car with bad credit can get overwhelming.
How Does Bad Credit Impact Car Finance?
Whenever you take out a loan, a credit check is run. This credit report provides a snapshot of your financial habits to the lender. Giving them insight into whether you are a good candidate for a loan and one that can be trusted to repay the debt.
Should you have bad credit, you are less likely to be approved for finance of any description. The upside of this is that legally a lender cannot approve finance for someone who cannot demonstrate an ability to repay the loan. It’s designed to protect you, though it feels anything but helpful at the time.
However, it is possible to learn how to finance a car with bad credit. Though you may need to work a little harder than an applicant with good credit.
How To Finance A Car With Bad Credit
Your first step in figuring out how to finance a car with bad credit is to assess your finance options. Some dealerships offer finance, as well as banks and alternative lenders.
With bad credit, your options will usually be more limited. You are unlikely to be able to access the competitive interest rates and lenders that someone with a great credit history would. If you know before applying that your credit report is not going to be favourable, ensure you select your loan carefully.
Repeated applications only lower your credit score further and look terrible to subsequent lenders when assessing your application. With bad credit, you should contact a lender such as Bad Credit Loans who specialise in helping those with bad credit.
How Do Lenders Assess Bad Credit Applications?
Just because you have bad credit, doesn’t mean you won’t find a financing solution. A bank is more likely to decline your application based purely on your credit score. A lender specialising in bad credit loans will review your history in more detail. Meaning that a small mistake in your past need not impact your need for a new car. They understand how to finance a car with bad credit. Lenders will review:
- Your credit history, as mentioned earlier banks will often not progress beyond this point if you have bad credit. Luckily there are bank loan alternatives.
- Your income, this can be from work, investments or benefit payments.
- Your current living expenses such as utilities, transport, food, rent/mortgage etc
- Any other debts you currently have such as personal loans, mortgage or credit cards.
- The amount you’re trying to borrow.
Even with bad credit, if you’re only wanting to borrow a small amount you may be successful. If there are no recent issues with your credit history you still have a good chance at being approved. Keep in mind that as a result of bad credit, you will likely pay higher interest rates and fees. This is designed to offset the risk you represent to the lender.
How To Apply For Car Finance With Bad Credit
To improve your chances of a successful application in spite of your credit situation, it is recommended to:
- Check your credit score yourself. This is easily done for free online and can help provide you with insight into your options. If your score is particularly bad and you can hold off getting a loan, you should. At least until you have worked to improve your score.
- Work on improving/repairing your credit score. In as little as 30 days you can make impactful changes that reflect positively on your credit score. Pay down credit cards, ensure your bills are paid on time and avoid unnecessary spending.
- Understand the loan criteria before applying. There is no point in applying for a loan product that you do not qualify for. It is a waste of your time and contributes to bad credit.
- Gather all the necessary paperwork in advance. Being prepared and thorough boosts your chances of approval.
- Demonstrate good habits. Even if you save just $50 a week, this shows financial discipline.
Break Down Bad Credit Barriers
No matter what your reason is for needing car finance, you shouldn’t let bad credit hold you back. The expert lenders at Bad Credit Loans can help. With a wide variety of loan solutions, specifically for those with a poor credit history, your new car can be a reality.
Bad Credit Loans are fully licensed and accredited and committed to helping you secure the right finance. Call today on 1300 123 328.