3:16 PM
Rich Dad River
Almost everyone who buys a new car, unless they are genuinely rich, uses car finance to get their vehicle. There are all sorts of good reasons to do so. Financing plans spread the cost of your vehicle over easy monthly payments, and can easily be refinanced as you move up the range of models available to you. It is also possible to get tax deductions out of car payments (if you use your vehicle for business purposes).
However – if you have poor credit you can find that car finance is a lot harder to get than it used to be. Understandably, lenders are extremely wary of giving money to people who have bad credit ratings because they fear the default.
The solution, provided you do have the money to make the monthly payments, is to use a high risk, or guaranteed, finance provider. High risk finance providers lend to people who have bad credit scores, provided they are capable of providing a sensible repayment plan, which proves they have the ability and desire to pay back the money at the stipulated amounts and within the desired time frame.
There are plenty of reasons for bad credit ratings – some innocuous, some genuinely bad and some not as bad as they seem. Bankruptcy, for instance, gives you a zero credit rating because your debts get wiped despite the fact that you’ve been defaulting for a while. Yet the nature of bankruptcy also puts you in a much more tenable position when it comes to future loans – because you don’t have any other loans fighting for your income.
A bad credit rating that comes as a result of never having had a loan is negligible but can prevent a normal lender from providing you with car finance. In this case you just tell your guaranteed financier why you have a poor credit rating and they will have no problem giving you the money that you need.
While no car finance provider wants you to default, you have to remember that the value of the asset you are borrowing money to buy, is fixed and predictable. That means that even a poor credit rating, as long as it is backed up by a comprehensive repayment proposal, can represent a viable option for a lender. In the event that you do default, your finance provider simply repossesses your car and sells it.
Please don’t misunderstand me - I am not for a monument suggesting that it is OK to get car finance with no ability to pay or intention of paying it back. What I am saying is that finance providers are in the business of lending money so they’ll do a reasonable amount to be able to lend it to you.
If your accounts are genuinely toxic, there’s very little chance that anyone will lend you money for a car. Again, the key is to provide a plan that shows a genuine probability that you will be capable of making the payments required of you. If you need help with that plan, you should be able to enlist the free services of financial advisers employed at citizen’s advice institutions.
Bad credit car financiers are quite common, so you can even take the time to shop around. Be very careful about reading the fine print on a high risk car finance package – if you are already in financial difficulty you will want to be sure that you are not signing up for something with hidden charges or sudden punishing rises in the APR.
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