Bad credit is less than ideal, there is nothing to gain from dwelling on that fact, we’d all love to enjoy a glowing credit file but life is never plain-sailing. As a result, people may very well find themselves with bad, or poor, credit scores. Improving those scores involves a lengthy process of paying off monthly repayments, outstanding debt, and effective budgeting – but, in the here and now, what options are available to you so that you can drive away in a vehicle on a finance plan, despite your financial circumstances. In this blog, we’re going to be outlining three different bad credit car finance options that you may or may not have heard of. All three are different and have a wide range of benefits and drawbacks, all of which should be weighed against your personal circumstances, and your overall ability to make the monthly repayments spelt out in the finance application process.
While these are three popular options, there are clearly lots of different finance processes one can go through to attain a vehicle, despite their poor credit check, and all of them should be considered as some may more be suitable than others.
How To Get Car Finance With A Bad Credit Score
The following three are popular among applicants with bad credit history and can help them achieve the necessary finance package to secure a wide range of different vehicles – from hatchbacks to sports cars, and family-friendly cars.
Thorough research and several ‘soft checks’ should be done to make sure that the monthly repayments, and overall cost, are something that you can comfortably afford based on your income and other essential expenditure. A well-rounded, detailed, patient approach is the key to all of this.
Hire Purchase (HP)
This type of bad credit car finance is popular for many reasons. The main one is that the full, entire, payment of the vehicle is spread over the monthly payments. Unlike other options, as we’ll explain, there is no final payment to own the car, either you’ll own the car at the end of the monthly payments, or you’ll pay a very small final fee to officially complete the vehicle purchase. It is a very straightforward option that does include annual interest rates which are usually higher for people with poor credit histories as they pose more risk.
Guarantor Car Finance
Popular among young people looking for their first car, and people with a bad credit score. Guarantor car finance involves a third party acting as a sort of insurance policy that can step in and make payments if the monthly repayments cannot be met by the applicant. A guarantor loan negates a lot of the potential risks involved because there is someone in the process that has a proven record of being a reliable borrower. For a lender, and people looking for car finance, this option is extremely popular because, in theory, the guarantor need never be involved if the monthly repayments are met.
Also, another secondary benefit, is that it can help build the applicant’s credit score and gives them a chance to prove they can make regular monthly payments, leading to more preferential rates, and cheaper future payments.
Personal Contract Purchase (PCP)
Spread over a number of months and years, like a Hire Purchase, a Personal Contract Purchase (PCP) will involve monthly repayments, high-interest rates (or low, depending on the credit history), and a final option to purchase the car at the end of the agreed finance arrangement. Called a balloon payment, which is something we mentioned earlier, you can reduce the cost over months because you’ll be paying a higher final fee which will complete the buying process.
