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Car Finance with Bad Credit - 4 Ways to Spread the Cost of Your New Wheels


22nd Jan 2019 Managing your Money

When it comes to auto finance, your credit rating is just like the British weather - It is going to come into the discussion at some stage. 

You will need a credit history to get auto finance, and the better the credit score is, the better your odds of getting a good deal.

Getting rejected for auto finance because of your poor credit score can be disheartening. But whilst bad credit car finance can certainly be a challenge; it does not have to be the end of your four-wheeled fantasy.

If you are striving to get car finance because of your credit rating, there are various other ways to spread the cost of the car. All these options have a tendency to reduce the risk for your loan provider, so you have a propensity to be accepted, even if your credit report is not perfect.

  1. Secured Personal Loan

A secured personal loan is not exclusively an auto finance plan; however, it can be a great option. 

Secured personal loans are collateralised by something valuable you own. Having said that, your loan provider has a legal right to take your collateral away if you miss your repayments. Once you get your loan, you can use the amount to buy your car you want outright.

  1. Guarantor Loan

With this type of loan, a friend or relative co-signs your loan. 

If you miss your payment, or cannot repay your loan, your guarantor may have to foot your bill. The guarantor may also require to get credit-checked. And they will probably be required to offer something valuable they own - say for example a piece of diamond jewelleryor an investment - as collateral.

  1. Hire Purchase Contract

In a hire purchase contract,you use the car of your loan provider while paying off the purchase price infull or in regular monthly instalments. And after that, you can own the car.

As the car is the lender’s property during the agreement, they can take it back in case you miss your payments. Thiswill make it a bit less risky for loan companies. Thereforeyour application will have a higher chance of getting approved than it would with some other car loan options.

  1. Non-Status Lease Contract

Some loan companies and dealerships offer non-status rentals. Most of these are specifically designedfor those with 'bad' credit score. They are known as 'non-status' because your credit rating is not an importantelement in your application. Instead, the lending company may look at your financial situations in general.

Non-status leases tend to be riskier for your loan provider. Thereforeyour monthly instalments could be costly. You also will not own your car completely. 

At the end of the contract you can:

  • pay a pre-agreed lump sum payment and own your car outright
  • get a new car
  • give your car back 


Always steer clear of submitting several applications in a short time-frame. 

Once you submit an applicationfor credit, loan companies may check your credit history. This is usually known as a “hard search”, and it will get documented on your record. 

Most of these searches leave marks on your credit history and have a tendency to induce it to drop. Plenty of searches in a short period of time will make it seem like you're desperate for credit score, which may ruin your credit score even more.

Before you submit an application, talk to loan providers informally to find out what your options are. Different loan companies have different requirements for who they'll give credit to. 

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