If you compare the situation in the UK from 10 years ago, you will realize that a lot of people find it way more difficult to obtain car financing now, especially if they have bad credit. Credit is so tight these days and the credit rating of many people has also gone down. Furthermore, many lenders have changed their qualification requirements for new car loans. For this reason, you need to research well if you want to get a decent car loan with the best possible terms while also helping you rebuild your credit rating.
Importance of Owning a Car
Depending on what you have been used to, having your own car could be important to your daily living. For instance, you need it to go to work, drop your kids off to school, and do what you need to do with less hassle. Unemployment has increased in the UK, so people have lower chances of finding a job that they can commute to using public transport, which means they need to compromise. Owning a vehicle in the UK is no longer considered a luxury, but a need, which means people need to find car loans, even those who have bad credit history.
Options for Car Financing with Bad Credit
The options you have for car financing depend on your credit score. What you need to do first is to obtain a copy of your credit report. There are many things that can affect your credit score, and in the UK, financial institutions often use automatic software to decide whether you can get a car loan or not. Moreover, they do not really want to lend money to those who have bad credit.
Personal loans Of course, you want to own the vehicle you are going to purchase, so you want the registration to be under your name and not the name of the financial company. However, the lender sees this as higher risk. Therefore, you need to have a good credit score to obtain an unsecured loan. Moreover, this type of loan may have higher interest rates. Many firms offer personal loans with bad credit, but you may want to shop around to find the best deal.
Hire purchase agreements This option is available in many big banks and loan companies and they are more suitable for those with bad credit. The interest rates are also likely to be lower than unsecured loans. However, remember that while you will be the registered keeper of the car, it is still owned by the bank until you have completed the payment.
Dealership deals This car finance is not exactly from the car dealer company itself, but from the bank. Car dealers have arrangements with different financial companies and banks to offer car finance on their behalf and obtain a commission from the loan. In general, this type of car financing with bad credit is easier to obtain, but you may want to double check the prices as many car dealers offer 0% interest on their loans, but actually incorporate the interest in the price.