Got Bad Credit but Need a New Auto? Here Are Your Options
Not many people are fortunate enough to have a perfect credit rating. If your score is below par, then you’ll already know about the difficulties involved in arranging finance across most areas of life. However, if you’re looking for credit to buy a car, then the good news is that there are more options than you thought. Here are some tips on obtaining finance for your next auto purchase, whatever your credit situation.
Check Your Credit Score
Before you go any further, you need to know exactly where you stand with your credit rating. You’re allowed to check your score for free once a year and can do this by contacting the major credit reference agencies:
- and Equifax.
Your credit rating may not be as bad as you think (be especially wary if a car dealer has told you your rating is shot, and so you need to pay more for finance), but even if it’s poor then you’ll have a realistic picture of your situation.
Approach Your Bank
If you have a checking account, your bank may be able to help you with auto finance. If your credit standing is less than perfect, a good history with your account will help to offset this – your overall creditworthiness is about more than your raw credit score number. If you’re offered an unattractively high rate by your bank, getting a pre-approval is still useful, as it will give you ammunition to use in discussions with other lenders.
Ask Your Employer or Insurance Company
Many employers offer privileged access to auto finance as a benefit for their staff, particularly if driving is an important part of the job. Also, your auto insurance company may have a financial partner who could advance you credit as a perk of your policy. In both cases, credit restrictions are likely to be looser than on the open market.
Approach an Auto Dealer
Most auto dealers offer finance as part of a sales package and can deal with customers with a wide variety of circumstances. They probably won’t offer the best possible terms, but they will have access to a large number of specialist lenders, and so approval is relatively straightforward. However, it’s vital to get any deal in writing before agreeing to buy a car. It’s not unknown for a dealer to offer attractive finance verbally, only to raise the cost once you’ve committed to the purchase.
Applying online at a specialist auto finance website is perhaps the best option for most people. There are plans available for a wide range of circumstances, and with most credit packages you’ll be able to purchase your car from any dealer rather than being restricted in your choice. However, unless you know for sure that your credit rating is poor, it’s best to apply at a site that offers deals for both good and bad credit – that way you’ll have access to a better range of potential deals.
Lastly, if your credit rating is so damaged that none of these options are available, it’s worth considering asking a trusted friend or family member to act as a guarantor for your loan. By having them co-sign your agreement, the negative effects of your credit rating will be greatly reduced. However, it goes without saying that you’ll need to be sure you can afford your repayments unless you want to repay their favor with a default.
Protect Your Credit by Planning Ahead
No matter which of these options you choose, it’s essential to make a plan before you start looking around for a loan. Every time you apply for finance, this is recorded on your credit file, and too many applications can cause damage to your rating. However, all applications within a short time frame are treated as a single one as far as your credit score is concerned, so it’s important to act quickly rather than stringing out the process.
A car is almost essential for daily life in many situations. If you need a new car but have always had difficulty finding finance, the situation may not be as bad as you think – there are plenty of options out there, and with a little planning your chances of success are greatly increased.