Having a bad credit rating doesn’t have to mean the end to your dream of owning your own car.
Although it will affect your application for a car loan with some lenders there are loan providers who specialise in bad credit car loans and can help you out.
What is a credit rating?
A credit rating is a score that estimates your ability to be able to repay a loan based on your past history of borrowing and repayments.
You can find out what your credit rating is by contacting a credit bureau such as Veda and asking to access your credit file.
Why do I have a bad credit rating?
Once you retrieve your credit history you may notice that there are some factors that could add up to you having a bad credit rating. These may include:
- Missed repayments on money borrowed
- Delayed repayments on money borrowed
- Defaulting on a loan
- Having declare bankruptcy in the past
- An excess of credit enquiries
How can I get a bad credit car loan?
Getting a car loan with a bad credit history can be made easier by contacting loan providers that specialise in bad credit loans. These companies are set up to cater to individuals with bad credit ratings, the self-employed and first time borrowers who may find it hard to prove to traditional lenders that they are reliable borrowers.
Of course there are catches in going through these providers, the main one being that the interest rate on the loan will be higher than average. Even though some of the lowest rates on the market fall below 6 per cent you will most likely be discounted from getting a low rate deal depending on how much of a risk you are perceived to be. The high interest rate is used to mitigate the risk the lender takes on by allowing you to take out a loan with a bad credit rating.
Be careful not to apply to too many lenders as this will also have a negative impact on your credit history.
Another important thing to remember is to never take out a loan that you don’t think you will be able to repay. Use a car loan calculator to estimate what the repayments will be and them budget them into your normal ingoing and outgoing expenses. If you don’t think you can comfortably make the repayments and wouldn’t be able to keep up the repayments if there was a change in circumstances you may want to rethink taking out the loan.