If you have a poor credit history, bad credit car finance is another option if you need cash quickly.
For many people, a car is an essential part of their lives. Whether you use a car to go to work or go to the shops, it can be very problematic to get by without one.
It can be difficult to get a large enough amount of cash together to buy a car. Some people take out a loan to fund their purchase. But, if you have a poor credit history, it can be challenging to find a loan provider willing to approve your loan application.
When you are in need of cash to buy a new car, the thought of looking for bad credit car finance can be intimidating.
CashLady takes a look at car finance options for those who want to borrow money to buy a car but who do not have a good credit history.
Are there reputable lenders who offer bad credit car finance?
Yes. There are reputable loan providers who give vehicle loans to people who have a poor credit history.
As well as looking at your credit history they will look at how much you can afford to pay. A bad credit history will not necessarily stop you from getting car finance.
It does not matter if you want to buy a family-friendly car or a small car suitable for the city. There are loan providers who specialise in providing vehicle loans to people without a good credit history.
What is a secured loan?
A secured loan is a loan where you (the borrower) pledge something as collateral for a loan. In the case of a mortgage, the collateral would be a house.
Many adverse credit car finance options are secured loans. This means that you are using the car as security for the borrowed money.
Why do I need to pick bad credit car finance companies that are FCA regulated?
The FCA regulates loan providers operating in the UK.
By using a company that is FCA regulated, you will know that they are adhering to the FCA’s standards.
No matter what type of personal finance you look for, you should always check they are members of the FCA and associated regulatory bodies. This will help to keep you safe from illegal operators.
What options do I have when it comes to bad credit car finance?
You have a few different options if you want to buy a car:
Hire Purchase is one of the most popular ways for those who need to borrow money to buy a car.
It is a type of secured loan. A finance company lends you money to buy a car but they still own the car until you pay the loan off. However, you will be the ‘registered keeper’ so you are responsible for all repairs and upkeep, including the insurance.
You will need to make regular monthly payments back to the finance company. At the end of the loan term, after you have paid off the loan, you will then own the car.
First Response Finance offers bad credit car finance. They encourage applications from people with a poor credit history. Including those who have defaulted on payments in the past, have been rejected elsewhere or have CCJs.
First Response Finance is FCA regulated.
PCP (Personal Contract Purchase)
A PCP is where a lender will lease you a car. They will determine the term of the lease and calculate how much the car will be worth at the end of the lease. This is known as the GMFV – guaranteed minimum future value.
The lender will then take this value (plus the value of any deposit or part exchange) off the value of the car. This will be the amount they use to work out how much you will pay per month.
At the end of the contract, you will then be able to buy the car for the GMFV price if you want or give it back to the lender.
Hippo Leasing offers bad credit car leasing and bad credit car finance, including PCPs. Some companies require you to put down a deposit in order to take out a PCP. Hippo Leasing do not always require a deposit in order to take out a PCP.
They say that they can help even if you have CCJ’s, missed payments or defaults.
Hippo Leasing is FCA regulated.
Bad credit car dealers
There are car dealers who specialise in providing finance and supplying a car. You should be able to find one local to you if this is the route you want to go down.
Bad credit car finance only – a personal loan
You can apply for a loan from short-term loan providers, personal loan providers or payday lenders. You will then be able to take this cash and purchase a car from any dealer.
Unlike Hire Purchase or PCP, you will own the car immediately.
On Stride offers ‘bad credit loans’ of up to £10,000.
If approved for a loan, you could use this cash to purchase a car.
On Stride Financial, offers unsecured loans, so if you got a personal loan from them it would not be secured against the car you bought.
On Stride Financial is FCA regulated.
What are logbook loans?
Logbook loans are a type of secured loan. This means that you are borrowing money that is secured against your car.
The logbook lender will essentially own the vehicle up until the point that you pay back the loan.
You can normally borrow anywhere from £500 to £50,000, depending on how much your car is worth.
When you take out a logbook loan, you hand over your car’s logbook to the loan provider.
Logbook loans are essentially a way or releasing money from your car.
You must make sure to keep up your payments or your car could be repossessed.
Car Cash Point says that they do not carry out formal credit checks when you take out logbook loans with them, so your credit score should not be affected. They also encourage applications from people who have been refused loans before.
Car Cash Point is FCA regulated.
Varooma encourages applications from people who have a bad credit history including CCJs and defaults.
Also, Varooma is also FCA regulated.
Mobile Money is another company who offer Logbook loans. Their minimum loan amount is £500 and the maximum is £25,000.
Mobile Money also has a very attractive representative APR of just 99.9% which is very competitive in this marketplace.
Will I definitely get bad credit car finance even if I have a poor credit history?
Different lenders use different criteria to decide whether or not to give you a loan. This includes your credit history and information they already hold about you, such as previous loans they have given you.
As a result of this, one lender may approve you for a loan, whereas another may not.
Could I get car finance from short term loan providers?
Yes, you can take out a short-term loan instead of taking a loan out with a specialist bad credit car finance company.
Short-term loans are generally for lower amounts, so whether they will work for you depends on how much you want to borrow.
Most short term loan providers offer a maximum of £1,500.
Should I only look for bad credit car finance?
You should only apply for bad credit loans if you have exhausted all other options. This is because bad credit finance can have a higher interest rate, so you can end up paying more back than other types of loans.
You must also make sure that you can comfortably afford the monthly repayments throughout the term of the loan.
When you need a new car it can be difficult to get hold of the cash quickly. This is especially true if you do not have a good credit history.
When it comes to financing your car purchase there are a number of different options including hire purchase, PCPs and short term loans.
There are reputable loan providers in the marketplace who specialise in providing loans to people with a poor credit history.
Because many types of car finance are ‘secured loans’, your car could be repossessed if you do not keep up with the loan repayments.
Bad credit car finance is not the only option you have to fund your vehicle purchase. Depending on how much you want to borrow, you could also take out a short term loan or a personal loan instead of a specialist vehicle loan.
Using a loan broker to find the right finance for you can be an efficient and effective way to find a bad credit loan provider.
Just like with any type of loan, it is important to make sure that you can comfortably make the repayments, both now and in the future.