If you have bad credit, you may already know that getting financing or credit can be more difficult. It can be really disheartening to be denied car financing, but there are ways to increase your chances of getting a car loan. Getting in a better financial position for credit can take time, but the benefits of having a better credit score are undeniable. Good credit scores can benefit your life in many ways and help you save money on your future finances. If it’s time to buy a new car, let’s see how you can get approved for a car finance loan to finance it.
How do credit scores affect car financing?
When you apply for credit or a loan, lenders will want to know how you have handled credit in the past. They can do this by checking your credit report and your credit score. A lower credit score may indicate that you have had difficulty in the past repaying on time, that you have high levels of existing debt, or that you have no credit history. This can increase the level of risk for the lender, and they may be reluctant to offer you car financing. However, there may be some factors you can work on to help you get a car loan.
Ways to Increase Your Ability to Obtain Auto Finance
If you have bad credit, it may be more difficult to get financial approval. It’s worth remembering though that car financing is never guaranteed and you will need to meet the lender’s criteria before you can get approved. However, you will be happy to know that there are ways to increase your chances of being approved for car financing.
Check your credit report
When applying for credit, you should always check your credit report. It is really important that all of your information listed is accurate and up to date. Having incorrect information on your credit report can negatively impact your score. Lenders also use your credit report to verify the details of your auto finance application and if they don’t match, lenders might fear it is a fraudulent application. When it comes to getting a car, you should always be honest about your situation and provide all information accurately.
Work on your credit score
If you’ve checked your credit report and found that your score is a bit low. There are several ways to help increase your score. If you have never had credit in the past, it is best to establish a little credit history first, as lenders cannot predict what type of borrower you will be. You can do this by taking out a mobile phone contract in your name and setting up direct debit to meet refunds or by using a credit card to make small purchases each month and pay for them on time and in full. To improve your credit score, you must also meet all your current financial commitments on time, reduce your debts, limit the use of credit and avoid taking out new credit.
Have a down payment
There are many auto finance deals that don’t require you to have a deposit, but having a car finance down payment can be beneficial. From the lender’s perspective, this shows good financial management and can increase your chances of approval. For you, it can help reduce your loan amount and make your car finance deal more manageable.
Choose the right lender
It can be difficult to get car financing for bad credit if you choose top-notch lenders, banks or building societies. These types of lenders tend to offer financing to those with good credit ratings and offer better rates because the risk is lower. Your car financing may be refused because you do not choose a suitable lender for your situation. Lenders specializing in subprime or bad credit car financing offer dedicated packages for people with lower credit scores and help make car loans more accessible.
Choose a cheaper car
When you have bad credit, it can be harder to get approved for car financing on larger loans. If you want to buy a car, you can consider choosing a cheaper car or a used car. Used cars tend to be less expensive, which reduces the loan amount. Lenders may be more accommodating if you choose a smaller loan because the risk is reduced. It can also help lower your monthly payments and make your plan more affordable.
Apply with someone else
If you’re having trouble getting financing for a car on your own, you might consider applying with someone else. If you are a couple and want to split payments on the same car, you can apply for joint car financing. This is when two people split the reimbursements and can both use the vehicle. If you have a low credit score and a good income, but your partner has a better score, you could increase your chances of being approved for a joint agreement.