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Money

Bad Credit Car Finance: Here’s What You Need To Know

If you have a less than perfect credit score, you may have worried about securing a car through finance. However, there are options available for you, including bad credit car loans, which are designed to allow those with a low credit score to purchase a car. If this is something that you think would work for you and your financial situation, here is everything you need to know before searching for a loan.

How Does Bad Credit Car Finance Work?

Not every lender will offer bad credit car finance, but those who do will base their lending decision on affordability, rather than your whole credit history. This means that they will assess your current income, your regular outgoings, any essential or reoccurring monthly spending. This will determine whether or not you are in a stable position to make the monthly repayments as required.

Types Of Bad Credit Car Finance

There are three types of car finance that you may be able to apply for:

  • Personal Contract Purchase (PCP) – this is a loan that is secured against the vehicle with regular monthly repayments. You will only pay the depreciation value of the car and there is the option to purchase the car at the end of the term.
  • Hire Purchase (HP) – this is a loan that is secured against the vehicle with regular monthly repayments and you are guaranteed to own the car at the end of the term.
  • Personal loan – this type of loan allows you to purchase the car outright and is not secured against the vehicle. You will pay monthly, usually with interest, and own the car from purchase.

Each type of loan has its own pros and cons, and what may be suitable for someone else, may not be suitable for you. Assess your personal and financial situation first before seeking an agreement.

Will Applying For Bad Credit Car Finance Affect My Credit Score?

Typically, submitting a standard application should not harm your credit score, unless a credit check is agreed as part of the process. Once a lender has reviewed your application, they will typically then need to perform their checks, which may impact your credit rating. However, by agreeing to car finance and making sure that you make the monthly repayments, you can improve your credit score over time.

Your credit history will show that you have successfully made repayments every month and if you complete the full term, this will show as a closed case with full repayment, which will look very attractive to future lenders.

How Can I Improve My Credit Score?

If you would like to bolster your credit rating before seeking car finance, there are several simple steps that you can take, including:

  • Make sure that your name and address is on the electoral roll
  • Update any bills with your new address if you have recently moved house
  • Pay off any high levels of existing debt
  • Avoid applying for credit too many times in a short period of time
  • Keep your credit utilisation low

Hopefully, this brief guide to bad credit car finance has helped you to decide whether this is a good option for you. However, if you are worried about making the monthly repayments or have recent marks on your credit history, please seek financial advice before searching for finance.


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Hi Pals! Thanks for stopping on Guest-blog.com. This blog provides a source of inspiration for shopping in style, lifestyle tips, and home and decor ideas. Here you can find tech reviews and fashion style guides on luxury experiences in destinations from all around the world.

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