Getting a vehicle on finance can be a really exciting prospect. You can usually get a better vehicle than you first thought and spread the cost! Vehicle loans allow you to pay the cost of your chosen vehicle into affordable monthly payments over a number of years. But what are your options if you have a low credit score? For a long time, it was a common misconception that having a bad credit score meant you couldn’t get accepted for finance. In 2022, there are many options for people with bad credit to get a car or van. But there are also a number of ways you can help to increase your chances of approval and also get a better rate offered.
Why is your credit score important for vehicle loans?
When you get a car or van on finance with bad credit, lenders may see you as more of a risk. If you’ve had problems in the past meeting repayment deadlines, lenders may assume you would default on their loan if they accepted you. Lenders will usually perform a credit check on your credit report before they even accept you. People with better credit scores usually get access to better finance rates which can save you money in the long run. These people tend to have a long history of good credit management and meeting payments on time. From a lenders point of view, these applicants are less risk as they aren’t likely to miss their payments. If you have a bad credit score, you could consider spending some time increasing your credit score first before you apply.
How to increase your chances of auto loan approval:
Work on your credit score
There are a number of ways you can start to rebuild your credit score (tips here) if you’ve had problems the past. The main factor is your payment record. You can easily increase your credit score by spending a few months meeting all your current payment deadlines, reducing any debt you currently have, fixing any mistakes on your credit file and keeping your credit usage low.
Explore financing options
Vehicle financing isn’t just one size fits all. In the UK, you can get a car or van on a hire purchase, personal loan, or personal contract purchase agreement. But having a bad credit score means you may be more suited to some agreements more than others. Hire purchase car finance can be perfect for people looking for cars on finance bad credit. This is because it’s a type of secured loan which means the finance lender owns the car until your final payment has been made. This gives the lender more security because if you fail to meet your repayments, they have the right to take the car off you. Its bets to explore different financing options before you commit to one.
Reduce your debt
Your credit score and also potential lenders considers the amount of debt you already owe. To help improve your credit score and also make your finance deal more affordable, you could consider reducing the amount of debt or credit you already owe before you start applying for finance. If you’re struggling to meet your current finance commitments, you should contact your lender first to see how they can help.
Increase your deposit
There are many finance deals that don’t require a deposit, but it can work in your favour to have one saved up. Putting more towards your finance agreement means you don’t have to borrow as much from the lender. A deposit can reduce your monthly payments, help you get accepted and also reduce your interest rate. This means you won’t pay as much back in interest and helps save you money in the long run.
Register on the electoral roll
In the UK, the electoral roll is a list of all the people in the UK who have registered to vote in election. Even if you don’t want to vote, you should still register on the electoral roll. Lenders use the register to verify that you are who you say you are and can also verify your living address.