FINCAR

Car Finance for Buyers who have "Blotted their Copybook"

Tuesday, 21 October 2008 18:26

Need a car badly? No credit history? Failed to pay some debts in the past?

A bad credit history doesn't prevent you from obtaining car finance. In fact, lately it seems that there is a proliferation of lenders offering to lend without asking questions about your past, and without requiring more than a token deposit.

Careful! It would be fair to call some of these financiers "loan sharks". They may charge excessive interest rates and fees and impose quite unconscionable terms! Be particularly wary of those who appear to offer cheap loans. They are likely to compensate with high hidden costs.

There are safe finance options for those with a bad credit history.

Before applying for a loan, obtain a copy of your credit report. Study it carefully to ensure the information it contains is correct. Often, important details are omitted such as that you settled a debt, or that the debt was in dispute. If records are incomplete or incorrect, apply to have them corrected.

If you have current outstanding debts, try to settle them, or enter into a time payment agreement with the creditor. Having outstanding unpaid bills will go heavily against you when applying for any kind of finance. A continual bad history will suggest to lenders that you are unlikely to repay any loan, and make it very difficult to borrow.

The worst thing you can do is to try to cover up your history with false or misleading information. If you have made mistakes in the past, acknowledge them honestly and be prepared to demonstrate that you have learned from them.

If you are able to find someone to guarantee your loan, obtaining credit despite a bad history will be much easier. Demonstrating a history of saving and managing your finances well since a debt default will also help. Other factors that influence a financier favourably are a larger deposit, and borrowing to buy a car less than seven years old.

Most lenders will refuse finance to someone they have had prior losses with, so avoid applying to lenders with whom you had prior bad debts, even if you eventually paid them. Consider using a finance broker to source finance for you. Brokers are experienced in explaining your history and presenting credible evidence of your ability to service a new loan. They know which lenders are most likely to consider your application, and they have experience negotiating rates and conditions. They also know which lenders are reputable and fair.

Most importantly, make sure you budget sensibly and you can afford the repayments on your car loan. You can erase a bad credit history over time by making regular payments of agreed amounts, and avoiding taking loans that you are unable to repay on the agreed terms.