How to Get Approved For a Car Loan If You Have Bad Credit
There are a few milestones in our lives, and for some passing their driver’s licence and getting their first car is one such milestone.
Cars represent many things to people, and freedom is one of those things. Freedom to be able to go where you want, when you want.
No waiting for the bus or train, no being dependent on others to drive you around, no now you can do the driving.
For now owning a car is a large responsibility, and something many of us want to do and can do. Things may change in the future as we may use short-term rental cars, or as cars become more autonomous and self-driving, we may not need to own a car.
However, until that day arrives, we will still be driving and wanting to own our own car.
However, buying a car is not a cheap venture, cars can be expensive. Of course you can buy some cars for a reasonable sum, but even the reasonable sum can be thousands of pounds.
And for many of us, we cannot save that kind of money quickly to pay cash for a car, so we seek out financing, we need to take out a loan to buy the car of our dreams.
If we need to take out a loan to buy a car, then we need to show a good credit history, and have a good credit score, and not everyone has a high credit score and good credit.
Some borrowers may have had some past problems in repaying a loan, which has caused their credit scores to drop. Some may not have had credit in the past, which can cause them to have a low credit score.
However, bad credit, or no credit aside, we still want to buy a car, and need a loan to finance the car.
So how can you improve your odds of being approved for a car loan if you have bad credit?
Buy the Right Car
If you are concerned about getting approved for car financing and/or a car loan, buying the right car is important, and we are not talking about getting the car of your dreams or one that has a good track record; although this is important as ell.
We are discussing buying the right car for you in that you can afford the car.
Setting your sights on a £25,000 high-end car when the reality is you can probably only afford a £10,000 car, does no one any good.
You may wish to look into buying a used car as well, one that has already depreciated in value, and is a good bargain.
You want to choose a car that is affordable based on your budget and income. It also will make qualifying for a car loan easier as well.
If your monthly payments are affordable, you are more likely to be approved for the loan.
Don’t forget to take into account the expenses associated with owning a car as well:
* Maintenance and repairs
* Road tax
If you are seeking a loan to buy a car, most car financing and loans for cars can be secured loans, meaning the loan is secured by the car. Should you fail to make the payments, the car can be repossessed.
Secured loans can be easier to qualify for, and some lenders may approve a loan that is secured, even if the borrower doesn’t have a high credit score. This due to the fact the loan is secured.
One way to insure your car loan is approved is to have a large deposit. Most loans for cars, and for properties, lenders require a deposit.
A bank or lender may only allow a borrower to borrow 80% of the value of the car, some lenders may allow a higher percentage, some lower.
An example may be if you wish to buy a car that is being sold for £10,000, a lender may lend £8,000 towards the car, leaving you with having to have a deposit of £2,000.
The larger the deposit you have, the higher the probability your loan will be approved. This is due to the fact the lender’s exposure on the loan is less, in addition, the larger the deposit a borrower has, the less likely they are to default on the loan.
Have a Guarantor
One fail safe option to insure your car loan is approved is to have someone be a guarantor for you.
Guarantor loans are loans that are approved based on affordability, and having a guarantor. Someone who knows you and will pay the payments should you default on the loan.
Having a guarantor is good for someone with bad credit, and also for someone who may have no credit, and are looking to build a credit history.
One thing to do prior to even looking at cars and applying for car loan, get a copy of your credit history and credit score and see where you stand. Knowing this information is vital before you begin the process of buying a car, and seeking out financing.