If you’re struggling to get a car on finance, you may be wondering if any lender is ever going to lend to you! There are a number of reasons why your car finance application may be rejected but one of the most popular reasons is due to a bad credit history. You may find yourself with bad credit due to missed or late repayments in the past, high levels of debt or no previous borrowing history. Whatever your reason for bad credit, there are a number of ways in which you can help to increase the likelihood of getting a car finance approval and also a better interest rate offered.
- Work on your credit score.
The most obvious and easiest way to improve your chances of getting a car loan and a better interest rate is to improve your credit score. If you have a bad credit score due to financial mismanagement, you should start to rebuild your score by showing good financial habits. By meeting all current repayments on time and in full, you can show future lenders that you can be trusted to handle your credit responsibly. If you don’t yet have a credit history, you should start to use credit little and often and make payments on time and in full. You can do this by getting a mobile phone contract in your name and setting up direct debits to never miss a payment!
- Find a bad credit lender.
When you are struggling to get a car finance approval, it may be due to the fact that you’re not applying with the right lenders. You may find it harder to get accepted with prime or mainstream lenders as they usually reserve their low rates for those with good or excellent credit. You can check your car finance eligibility for free with a bad credit lender first to see if you would be better suited to their panel. Bad credit specialists are usually made up of different lenders who can offer car finance packages to a range of people.
- Save for a deposit.
Having a deposit for car finance can help to increase the likelihood of approval rates because you don’t have to borrow as much from the lender. When you put down a deposit at the start of your agreement, you are lowing the loan amount. A smaller loan can then also mean lower monthly payments and a better interest rate too! From a lenders point of view, it reduces the risk as they don’t have to give out as much money and also shows good financial security.
- Pay off any existing debt.
Your credit score considers how much credit you currently owe. When you have high levels of existing debt or are at the top of your credit limit, it can be negatively impacting your credit score. Debt also makes it harder to manage your affordability for car finance as you will need to prioritise paying off your existing debt first. It can be a good idea to reduce any existing debt you owe first to free up some money for car finance and also increase your credit score.
- Make a joint application.
If you’re struggling to get approved on your own, you could instead consider a joint application for finance. A joint car finance application is when two people, usually a couple, apply for finance on the same car. From a lenders point of view, it reduces the risk as there are essentially two ways for the finance to be paid. Both applicants are legally responsible for meeting the deadlines though and if you fail to do so, both your credit files can be negatively impacted.