To get a decent new or used car these days, most people need car finance. While the credit crunch did make most of the world fear loans and debt for a while, people soon began to differentiate between good debt and bad debt and in terms of finance cars are an acceptable cause of debt.
A car loan from a reputable finance company, which you can afford, and which is used to purchase a vehicle from an approved dealer, should be a manageable debt, and if you don’t miss any payments and pay it off in full it could actually improve your credit rating. However, obviously should you fail to keep up with payments it will have a negative effect and could cause you further problems?
This is why it is important that no matter how desperate you are, you only take out a loan from a reputable company. These companies will perform full checks on you to make sure that they are not giving you a loan you can’t repay, and as experts on buying cars on finance they will help you to make sure you are buying the vehicle from a reliable dealer, and also getting a fair price for it.
If you have a really good credit rating and a regular income, getting finance for a car should be straightforward. Reputable lenders will also check that you have a valid driving license, and that you are getting a fair deal on your vehicle.
If you have a bad credit score you can still apply for car finance, but it might take a little longer. There are things that you can do to improve your chances.
Here is some handy advice that you can do to improve your chances.
Save up a deposit.
If you are planning to buy a car but have a bad history with debt or money management, or if you just have a low income, saving up a deposit will help you in all sorts of ways. It will help you to work out your budget and what you can spare each month; it will prove to your lender that you can be responsible with cash and it will reduce the amount you have to borrow.
Have a solid address history.
If you have moved around a lot in the previous 3 years, this will make lenders look unfavourably on your application. If this is the case, it is probably worth waiting a while until you’ve been in your current property at least a year and also make sure that you register to vote.
Proof of income.
Save a few months worth of pay slips or bank statements to prove that you have money coming in.
A guarantor.
This is not always necessary, but if you have someone with a good credit history who is willing to act as a guarantor for the loan then it can boost your application. This can be particularly useful for young drivers who have no credit history. Make sure you look into the terms of the guarantor agreement carefully and think about the effect it could have on the guarantor’s credit rating.
Finally, make sure you fully understand the terms of any loan or finance agreement before you sign it, and that you know exactly how much you will be paying each month and for how long. Don’t feel bad about asking questions or requesting that the lender makes things clearer for you – you need to be confident and in control of your finances.