Car finance allows you access to a vehicle if you don’t have the money to pay for it outright there are a range of options including car finance for bad credit that allows you to pay for your car in more affordable monthly payments to suit your budget each month in some cases, your credit score could be taken into account when it comes to approval, to find out more about the impact of your credit score on car financing, read on.
Types of car finance
There are a number car finance options you can pick from to make procuring a new car more less expensive and practicable. Here are most of the most popular alternatives:
Hire Purchase: This type of finance allows you to pay a sum towards the vehicle each month for a set period, and when the payments have been made, you will own the car.
PCP: With this type of finance, you may have to put down a deposit, and you will then pay a sum each month towards the car. At the end of the agreement period, which lasts around 3-4 years, you will have the option to purchase the car, hand it back, or take out a new agreement on another car.
Leasing: This option allows you to pay a sum each month for your chosen vehicle, but with this type of finance, you won’t have the option to own the car at the end of the agreement.
Car finance & your credit score
Once you’ve chosen your preferred type of finance, it helps to know more about how your credit score plays a part in approval. Below, we’ll take a closer look at how your credit score can impact car finance.
Loan approval
Car finance requires you to pay a sum of money to a lender every month, so your lender needs to ensure which you’re going that allows you to make those repayments without problems, with out falling into financial issue. Your lender may also examine your credit score score to get a higher concept of the way you’ve controlled your price range in the past. If your credit score rating is low, you can discover it harder to achieve approval as you pose greater of a threat to the lender. If you’ve got an amazing credit rating, you’ll be more likely to be approved for your preferred finance option.
Interest rates
Your credit score could also impact the interest price you are offered on your car finance agreement. If you have a low credit score, your lender may be more likely to elevate interest costs as they need to make sure they’ll make their cash returned. If you have a good credit score, you’ll benefit from some of the best interest rates over the course of your loan as your lender will see you as a creditworthy borrower.
Deposit
With some types of finance options, you may be required to put down a deposit. If your credit score is low, you’ll be more likely to put down a deposit as your lender may see this to mitigate the risk posed by those with lower credit scores. If you have a high credit score, you’ll be less likely to need a large deposit – you may not even need to put down a deposit at all!
Bad credit options
If you’re involved approximately applying for vehicle finance due to your credit rating, there’s an option that means you can benefit from a brand new car even if you’ve struggled to make repayments inside the past. Some lenders offer horrific credit score alternatives that base their approval choices on affordability rather than credit rating, so in case you display evidence of income and employment, you could nonetheless benefit from a automobile of your choice to get from A to B, no matter your credit rating.
