Five Considerations for Your Bad Credit Car Loan
A less than perfect credit score can sometimes be a barrier to even simple purchases such as a new car. There are many providers offering bad credit car loan solutions, which can provide a way to secure the finance needed. However, the range of bad credit loans can vary greatly and it is important to understand the considerations many lenders will assess on your application. This can affect whether you are approved and the type of rate you may be offered.
1. Bankruptcy:
Bankruptcy is a fact of life in tough economic times. However, although it is more common, you should be prepared that if you declared yourself bankrupt in the last twelve months, you may struggle to secure finance. Some lenders do specialise in providing loans to people with bankruptcy on their credit record. Therefore, it can be beneficial to find out the exact date of your bankruptcy declaration to determine if it is a good time to apply. If you are approaching your one year anniversary, it may be a good idea to speak to a specialist lender or broker to check their policies regarding those declared bankrupt. This could allow you to organise anything you may need but you should be prepared to be very forthcoming and open about your information.
2. Security:
Security provides reassurance for lenders of your financial intentions. Most lenders offering a bad credit car loan will require some form of security on loans over $3000. Usually, this is the vehicle itself, but the vehicle cannot be used to secure additional loans if it has already been used as security. Even if you are applying for a smaller amount, by offering a down payment or security, you may find that you are offered more competitive rates or terms.
3. Employment
Almost every lender will require some assurance that you have sufficient income to cover the cost of the loan. Some lenders may allow for self employed people to self certify their income if they have no records or books to prove their income. However, when a poor credit rating is involved, lenders usually require more assurance that you are financially able to meet the monthly repayments. Many lenders will require copies of pay stubs or bank statements to show you have sufficient income. Certain forms of pensions, youth allowances or study grants are unlikely to be acceptable forms of income.
4. Documentation:
In many cases, lenders will require documentation such as copy bank statements. This is usually the statements for the last one to three months. The lender will be looking at if the account is in good standing, not going over drawn or having unauthorised borrowing charges imposed. They will also check if an amount of pay is being deposited regularly and if the servicing of any payments or debts matches the information you have provided. Red flags for lenders include direct debits to lenders you have not mentioned on your application, frequent withdrawals from inappropriate organisations such as gambling sites, and unauthorised borrowing.
5. Applications:
You should also be aware that applying for multiple loans can have a very damaging effect on your credit rating. While it can be a good idea to research your options, don't submit an application with multiple lenders. This will show on your credit report and discourage any potential lenders.
If you need assistance with a bad credit car loan, contact us. We are a broker with access to bad credit specialist lenders and would be happy to help you.
