- You have bad credit as a due to some issues in the past that are registered in your credit file; and;
- Your local bank has determined that you are actually not eligible for a new car loan.
Do not worry. You are still eligible for a car loan because lenders/credit providers do provide second chance to people with bad credit. However, you will need to:
- Show the lender/credit provider that you have improved your credit history; and
- Have a sensible explanation for any prevarications listed in your credit file.
When you have bad credit, you need to put in extra efforts and ensure the lender/credit provider of regular payments. Here are five important tips that you should consider and which may benefit you:
1. Take the Time to Clean Up Your Credit File
This is the most obvious tip for bad credit car loan, which you can do on your own before applying for a car finance. Following are a few ways of cleaning up your credit file:
- If you have any issues on your file that can be paid, you should pay them off as quickly as you can.
- If you have any bad credit listings that you are disputing with a creditor, you should address these issues as quickly as possible and try to come to some resolution with the creditor.
- If you cannot come to a final resolution, you should get some assistance from an intermediary that can mediate for you such as the industry ombudsman or a solicitor.
2. Provide a Reasonable Explanation of any Adverse Credit History
If you have any adverse credit history listed in your file, the lenders/credit providers will require you to provide a sensible explanation as to why you got the negative credit history, and they will need to be satisfied with your explanation.
3. Speak to a Qualified Professional
It is wise to speak to a professionally qualified finance broker as he/she:
- Deals with a number of lenders/credit providers on a regular daily basis, and he/she should know the credit policy requirements and guidelines of each and every lender/credit provider;
- Can advise you of the “steps” you can take to rectify your credit history, and also the “time frames” required to be undertaken by you; and
- Can advise you and show you ways of demonstrating your stable financial condition to the lender/credit provider.
4. Wait for Your Bad Credit to be Automatically Removed from Your Credit File
When you have settled and paid any outstanding matters appearing on your credit file, then they will automatically drop off your credit file. You may actually consider applying for a car loan after they are completely removed from your credit file.
5. Be Careful and Don’t Apply for too many Loans
Remember, you should only place credit enquiries on your credit file that are necessary. It is because every time you apply for any type of credit, the lenders/credit providers are required to place an enquiry on your credit file. So, when they review your credit file, they will be able to see all the credit enquiries you have made. Also, you may even find yourself being listed as a bad credit client due to several enquiries made on your credit file.
Un-discharged from Bankruptcy
If you are currently un-discharged from a bankruptcy or a Part IX debt agreement, it would be almost impossible to obtain a car loan. In a situation like that, you will need to have your Part IX debt agreement discharged. Additionally, you will have to wait for several months (minimum 12 months) before applying for a car loan.Now that you know the five important tips for buying a car with bad credit, do not worry. Follow the tips and get ready to buy your favourite car.