Can I Get Car Finance With Bad Credit?
A bad credit score can make it difficult to secure car finance, but it doesn't make it impossible. There are still several options available to those with poor credit, including PCP car finance, HP finance, and lease purchase car finance. You’ll just need to keep in mind when applying that your interest rates could be higher, which could result in higher monthly repayments.
In this guide, we'll explore what a bad credit rating is and the various car finance options available to individuals with poor credit.
What is a credit rating?
A credit rating, also known as a credit score, is a three digit number that indicates the likelihood of you being approved for credit. A higher score increases the chances of your credit application being accepted. It is used by lenders to assess how likely someone is to pay back money they borrow.
Credit ratings are based on a range of factors, including credit history, outstanding debts, and payment history.
What is a bad credit rating?
A bad credit rating typically means that an individual has a history of missing payments, defaulting on loans, or being declared bankrupt.
This can make it difficult to secure loans, credit cards, or other forms of credit. However, a bad credit rating doesn't mean that you’re unable to secure car finance at all.
What types of bad credit car finance agreements are available?
PCP (Personal Contract Purchase) Car Finance
This popular car finance option that lets you pay a deposit, followed by a series of affordable monthly payments, and a final balloon payment at the end of the agreement. Even if you have poor credit, PCP can be an easier option to secure than traditional car finance.
The best part? You get to enjoy the ride while the car remains the property of the finance company until the final balloon payment is made. Then, the choice is yours: pay the final balloon payment and take ownership of the car, return it to the finance company, or trade it in for a brand new ride.
HP (Hire Purchase) Car Finance
Looking to get your hands on a brand new car without breaking the bank? HP, or hire purchase, might just be the perfect solution for you. With HP, you'll pay a deposit, followed by a series of monthly payments, and a final payment at the end of the agreement. Plus, unlike PCP, once you make that final payment, the car is all yours to keep!
With lower monthly payments compared to PCP, HP is a popular choice for those with poor credit who want to take control of their finances. However, with ownership comes responsibility – you'll be responsible for any maintenance and repair costs. But don't worry, with HP, you'll be able to hit the road and enjoy the freedom of owning your own car.
Lease Purchase/Personal Contract Hire Car Finance
Lease Purchase is very similar to personal contract purchase, in that you pay a deposit, monthly payments and then a final balloon payment. The only difference is that with a lease purchase the balloon payment is mandatory, and you don’t have the option to hand the car back.
Lease Purchase is a popular option for those with poor credit because it often involves lower monthly payments than PCP or HP. However, you will need to have enough money saved to cover the balloon payment at the end of the contract.
How to get car finance with bad credit
Here are some of our tips to help increase your chances of securing car finance if you have bad credit:
Check your credit score:
Before applying for car finance, check your credit score. This will give you an idea of what lenders will see when they review your application.
Improve your credit score:
If your credit score is low, take steps to improve it. This could involve paying off outstanding debts, making payments on time, or disputing errors on your credit report.
Save for a larger deposit:
Lenders are more likely to approve car finance applications from individuals with larger deposits. Save as much as you can toward a deposit before applying for finance.
Consider a guarantor:
A guarantor is someone who agrees to pay the loan if the borrower is unable to do so. Having a guarantor can increase your chances of securing car finance.
Shop around:
Don’t accept the first car finance offer you receive. Shop around and compare offers from different lenders.
Do you want to finance your car?
At Birchwood Motors, we can help you secure excellent car finance deals on used cars. We’re specialists in finance for bad credit and we work with a large number of specialist lenders that offer car loans to people with a bad credit record. No two lenders have the same requirements for approval, so it’s possible that we have a lender who can approve your application.
Choose the finance option best suited to you
You have the option of applying for a hire purchase, PCP, or conditional sale finance agreement depending on their preference. On each of our car listing pages, you can view representative examples for each type of car finance agreement to get a clear idea of what you’d be expected to pay.
Apply for bad credit car finance at Birchwood Motor Centre today
If you’d like to learn more before you start your application, you can read our Finance Help page, where we explain what bad credit is in further detail and how we can get you approved.
But if you’d like to get started, you can apply online using our 2-minute application form on our website, and one of the team members will be in touch as soon as it’s been reviewed.