REALITY CHECK: Very few of us go through life without having to borrow money at some point, do we? That’s good news for finance companies and other types of lenders, but only if they get their money back over an agreed period, of course!
You know, it’s all about risk
Even people with a particularly bad credit history can secure a good car finance deal, if they can find a lender willing to take the risk. OK, the borrower may have been turned down for a loan by numerous lenders (and despair of ever having any luck), only for a lender to suddenly come along prepared to offer a loan, albeit under the strictest terms and conditions.
What’s your “credit worthiness”?
Perhaps you’ve got bad credit at the moment and feel like that odds on you getting a set of wheels or upgrading your current vehicle to a better one are impossibly high. Maybe you’re doubtful over your chances of success in securing car finance, due to the following reasons:
- You’ve got a County Court Judgment against you (a CCJ)
- Your mortgage is in arrears
- You’re unemployed and on Benefits at the moment
- You’ve been made bankrupt
- You work part-time work
- You’re self-employed
- On some other type of loan, you’ve defaulted on payments
- Poor credit – your credit rating score is low (and unlikely to rise anytime soon)
All those circumstances can have an adverse effect on your “credit worthiness” (as that awful industry expression goes!). But securing finance can be a strange and unpredictable game. You can be working full-time with no debts, have never been made bankrupt or had a CCJ against you, and still be turned down for finance by lenders, simply through having missed a single payment on a previous loan in the past. The whole credit application process is designed to find out, among other things, your current and future ability to pay and your credit history – how you’ve managed credit payments in the past. Decisions are made based on the risk you represent to the lender.
“I’d always managed my debts well in the past,” explains Charlotte in Amersham (Bucks). Charlotte was furious when a car finance company failed to approve her application for finance last year. “Of course, I understand that it’s not the actual brokers themselves who make the decision, but the lender they use. Still, I wasn’t happy. I work really hard doing two jobs, and had only ever missed one credit card payment after Christmas in 2014. I never dreamt that would be enough for me to be turned down by lenders. I was told they regarded me as “too much of a risk” – to use their words. But I didn’t give up because I knew there were some good companies out there who could distinguish between a bad prospect and someone like myself ; and I did get on the road in the end.”
Things are looking up!
Despite post-Brexit concerns across the country, the motor trade is still flourishing and looks like going from strength to strength in the years ahead. That’s good news for lenders as well as borrowers. Last year alone, a million cars were bought on finance in the UK, with many of those borrowers having a low credit rating. In a fiercely competitive market, car finance companies and lenders need to be flexible when it comes to considering applications, meaning that – even for those with poor credit – making an application for car finance is always well worth a try!