Having a low credit score can affect your ability to get accepted for vehicle finance. Not only can a low credit score affect finance rates, but it can also affect your chances of getting approved for store cards, credit cards, and mortgages! It may seem impossible to get accepted for bad credit financing but there can be a few ways in which you can help to get the approval you’re after. Credit scores are important when it comes to financing but it’s not the only factor that car finance providers consider. Let’s take a look at the best ways to get approved for vehicle finance with bad credit.
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How do credit scores affect car finance?
Credit scores are used by potential lenders to see what type of borrower you are. There are a number of factors that affect your credit score but the most important can be how you’ve handled credit in the past. Making late repayment or missing payments altogether can have a detrimental impact on your score. Potential lenders may be worried that you won’t pay back your finance and see you as more of a risk to lend to. The higher the risk, the higher the interest rate you may be offered. Competitive interest rates may be reserved for those with good credit scores.
Getting a car on finance with bad credit
Getting cars on finance bad credit is possible but there may be a few ways in which you can help to increase acceptance rates and the interest rate offered. There’s no set credit score you need to get accepted for finance, but it can be more important to find the right lender. There are specialist finance lenders who help people with low credit scores get accepted for car finance. Many of these lenders also take your affordability into account as it’s really important that you can afford to pay your finance each month. Many lenders may overlook a bad credit score if you can prove you would be able to comfortably afford your payments each month.
Van finance for low credit score
For many self-employed workers, a van is a necessity for running their business. But what if you want to buy a van with low credit? There are options available for bad credit van finance and it can be very similar to getting a car on finance. Knowing where you fall on the credit scale before you start applying for van finance can be beneficial as you get to see what potential lenders will be seeing. If there are any mistakes on your credit file, they could negatively impact your score. If you’re self-employed, it can be a good idea to pay all your income into a UK bank account if you get paid cash in hand regularly. This is so lenders can see how much income you have and if you could pay back your van finance on time and in full.
How to get the best bad credit finance deal
Getting a car or van on finance doesn’t have to be hard, by choosing the right lender and working on your credit score before your start applying, you can increase your chances of approval and also get a better rate offered.
Increase your credit score
If you’ve had problems in the past meeting your repayment deadlines, you may find yourself with a low credit score. You can also have low credit if you have no previous credit history too, this is because you have no evidence of what type of borrower you would be. You could consider meeting all your current payments on time and in full, fixing mistakes on your credit file, and keeping credit usage low to start to rebuild your credit score.
Save up for a deposit
Having a deposit to put down for both car and van finance can be beneficial. There are some finance agreements that require you to have a deposit so it is worth keeping in mind before you start applying. However, having a deposit to put down means you don’t have to borrow as much from the lender and can also reduce your monthly payments.
Clear existing debt
Potential finance lenders will also consider how much debt you currently owe. This can also include any current finance agreements you have. Even if you are up to date with your payments, having high levels of debt may put lenders off. They may assume that you can afford to take on any more credit. Reducing your current levels of existing debt can help to make your next finance deal more affordable.
Choose a shorter term
Car or van finance agreements can be paid back over a number of years. Many consumers choose to spread their finance over 3-5 years and the longer the loan term, the lower the monthly payments will be. However, choosing a longer-term can increase the amount of interest you will have to pay overall. You should try to choose the lowest term possible but with repayments that you can afford to pay back each month. This can help make it easier to afford your payment without paying back more than you need to in interest