Arranging the right car finance deal is something people all over Britain try to sort out every day. Happily, most succeed. For those with poor credit, the process can sometimes be difficult. But if you’ve got bad credit, should you grab the first finance deal offered to you?
No. Best to take your time. Do your homework. Shop around. In your eagerness to finally get a set of wheels, or to upgrade your current vehicle, don’t enthusiastically leap into a borrower-lender marriage! That’s where relationship problems lie…
Through a process of elimination, gradually crossing off any seemingly dodgy lenders from your list should narrow things down to a shortlist of ‘possibles’ to approach. Yes, sadly, there are a few car finance cowboys out there who are obviously best steered clear of (excuse the pun!). The good news is, they’re in the minority.
Don’t be rushed
When it comes to the most popular reasons why people take out a loan, getting a car sorted is definitely “up there”, as they say. That means plenty of potential customers for brokers, dealers and lenders, which can often create an impression of car finance companies being too powerful – the dominant participant in the borrower-lender relationship. Unfortunately, this can all too often mean people sign up to the wrong deals, having been overwhelmed, rushed, or blinded by science, so to speak. By who? By a broker keen to sign up as many borrowers as possible (usually to meet a target), rather than putting the customer’s specific needs and particular situation at the centre of the negotiation, and having a process in place to provide the most suitable finance solution for them.
A realistic approach is best
One thing that borrowers with poor credit should remember is that, even for people with a great credit rating, raising the cash to buy a new car outright is rarely easy. Most of us end up seeking car leasing advice and then budgeting to meet the repayments each month. So, with there being no stigma attached to having bad credit (and borrowing over buying outright), let’s take a look now at some key things to consider when finding the right car finance provider:
- Be sure in your mind as to whether you’re after a car loan or wanting to buy a vehicle on HP (hire purchase). There’s a big difference. Some brokers offer both. With HP, you’re basically hiring a car until the final payment is made; whereas, with a loan, the car is yours from the outset. If things go belly up for you financially, you can sell the car (with finance owing on it). Can you do that with an HP car? Nope.
- Don’t let a broker talk you into paying more than you can realistically afford. Too many borrowers over-extend themselves. Unless you’re 100 per cent sure you can make the monthly repayments, don’t sign anything. Best to seek a loan elsewhere. You’ll find one.
- If a broker seems apprehensive about you making repayments, don’t be insistent, feeling perhaps a little affronted that someone other than yourself has made a judgement on your personal finances. If they seem nervous of approving a big loan (worrying it might be too high), that’s a good sign: it means you’re sitting across a desk from an honest person. Bearing in mind what the broker says, re-examine your figures. Then, consider taking the broker’s advice, and opting for a smaller loan (even if that means missing out on your ‘dream car’).
- Be wary of brokers/dealers/lenders keen to get you tied in to a long-term loan agreement. It might seem like a handy way to spread the cost, but it rarely ends up being a cost-effective strategy. Why? Mainly because of the interest on repayments. Key take-away from this piece of advice? Remember, a decent broker will advise you to make repayments over three years max.
The right car finance is out there!
Finally, it’s a good idea to check your credit rating with a credit referencing agency before you go looking for a loan. If your rating is low, don’t feel downhearted. You can still get a loan with bad credit!