Having access to a car is a necessity for lots of us, to get to work, or to make family life easier. But many of us won’t have the funds to pay for a car upfront – this is where car finance can come in and be useful. There is a range of options to choose from in terms of car loans and finance options depending on your preference, and even car finance bad credit if you’ve struggled to pay your bills in the past. Below, we’ll take a closer look at some of the loans available to you, and how you can improve your credit score so you can take advantage of a range of options.
Types of car finance
If you’re hoping to buy a new car, there are a few options that you will have to help make it more affordable. Many of us rely on car finance to help us purchase a car to get from A to B if we don’t have a lump sum to pay outright. There are a few different types of car finance you can benefit from and knowing more about them can help you make your decision. Here are a few of the most popular options.
- Personal loan: This option would mean applying for a loan to help you pay for the car in full. You would then own the car and make monthly repayments to your lender to pay off the loan over a set length of time. This type of loan is unsecured, which means many lenders will ask that you have a good credit score before they approve your application.
- Hire Purchase: With this type of finance, you will pay a deposit to take the car from the dealer. You will then pay the car off monthly, and you won’t own the car until you’ve made the final payment.
- PCP: This type of finance requires you to put down a deposit on the car and borrow the remaining amount. You will then pay an amount monthly to cover the interest and cost of depreciation without owning the vehicle. This type of loan typically lasts for around 2-3 years, and at the end of the term, you can buy the car, trade it in for a new car and repeat the process, or simply hand it back.
Car finance for bad credit
So, what happens if you have bad credit, but need a car to get around? Whilst the options above may be difficult to obtain if you’ve struggled to pay your bills in the past, resulting in a bad credit score, there are ways that you can still benefit from the freedom driving gives you. There are lenders that offer car finance for those with bad credit. Some of these lenders will base their decision on affordability, and instead of running your application through a computer to determine their decision, they can take a personal approach meaning your application will be reviewed as an individual case., increasing your chance of approval. There is car finance to suit everyone.
Improving your credit score
Whilst there is a range of options available, even if you have bad credit, it’s always best to improve your credit score so you can improve your chance of being approved for car finance with better terms and interest rates. There are a few things that you can do to improve your credit score to get the most from car finance lenders, such as:
- Build a strong history: If you don’t have a credit history, lenders will not have a score to judge. This is typically the case with younger people. Building your credit score means lenders will be able to decide whether you’re creditworthy. There are simple ways you can do this, for example, by applying for a credit card and only spending a small amount each month that you know you will be able to pay off.
- Pay bills on time: One of the main reasons why credit scores deplete is caused by late or missed repayments. Not being able to meet repayment requirements set out by your lender will have a direct impact on your credit score and will show other lenders in the future that you’ve struggled to manage your finances. Make sure that you stay up to date with repayments, paying on time and in full to boost your credit score.
- Check for errors: You may not realize it but something as small as a misspelled name, or an incorrect address can cause damage to your credit score. Check your credit report and let your provider know if any information needs to be changed, and you may just see your score go up!
- Keep applications to a minimum: Applying for many types of finance at once can have an impact on your credit score – it shows lenders that you are desperate for financial help and therefore may not be able to pay your bills on time. Keep your applications to a minimum to keep your score healthy.
- Mexico Daily Post
