Need a new car but have had problems in the past repaying a loan for car finance?
Had Problems Repaying Your Car Finance Within the Last 6 Years,
If this is the situation that you are in, and you had problems repaying your car finance within the last 6 years, it is likely that you do have a bad status rating. In order to check this for certain, you will need to sign up for an account with one of the credit reference agency websites to view your credit file and obtain your credit score online.
There are many credit check services online, including checkmyfile.com, equifax.co.uk and more recently noddle.co.uk – some of these services offer a subscription fee, or a one off fee, others are free so do shop around if you want the latter. As there is a lot of competition from credit check service websites, the majority of them are completely user friendly, simple to use and easy to navigate.
If, as you suspected, your credit score is bad, do not automatically assume that there are not loan for car finance options available to you. Being approved for a loan for car finance with bad status is achievable, as there are many lenders that welcome applications from those that have been declined elsewhere.
Why Do These Lenders Welcome Bad Credit Applications?
Bad credit lenders are aware that many borrowers do from time to time find themselves in a situation that affects their credit rating, such as being in debt and then being unable to repay their debts due to illness or unemployment. However this does not necessarily mean that the potential borrower isn’t at present in the position to repay a loan just because they have a bad credit score due to past circumstances.
As this is a risky business, bad credit lenders have to cover themselves for the risk that they are taking lending to a person with a bad status rating. This is achieved by applying higher interest rates, which will mean that the loan for car finance is overall more expensive than a loan for car finance offered to a borrower with a good credit score.
That said, if a borrower with a bad credit score is approved for a loan for car finance and repays the loan on time, they could see a positive effect on their overall credit rating, which will open up doors to better / cheaper loan for car finance and other financial deals in the future. Likewise, failure to repay the loan on time, will have a worsening effect on a credit rating.
Whatever You Do, If You Do Have a Bad Credit Score
only apply with lenders that state that they welcome bad credit applications. Applying with those that do not welcome application from those with bad credit will mean that you will be declined, which will further impact your credit rating. Therefore please research and choose your lender wisely. It’s crucial to ensure that you repay your loan for car finance on time for the duration of the loan term, this could potentially rebuild your credit rating so that you have a lot more finance options available to you in the future should you need them.