People, especially the millennial generation in the UK, are fond of fast cars and since many of them are quite expensive compared to the average savings rate in the UK. Thus, people have to resort to taking loans to finance their new car.
Now, getting a car loan approved in the UK is not easy, especially when you have a poor credit history.
This blog will explain your credit score's impact on your eligibility for car finance and whether taking a guarantor loan could change anything.
Apart from commercial banks, there are alternative sources of financing in the form of direct lenders and private lenders in the UK. These lenders are offering personal and business loans, especially to bad credit borrowers.
In addition, these loans are unsecured, for which the borrower does not have to pledge any asset as collateral, and neither is he required to produce any guarantor to be eligible for these loans. The only downside to these loans is their interest rates, which are significantly higher than those of a commercial bank.
Let's look at different credit scores ranges and how it suits the criteria set by other lenders for car loan eligibility. Here it goes:
Some respite upfront. You can usually get a car loan with almost any credit score. Still, if your credit score falls below the national average, you will not get ideal deals that borrowers with a decent credit score will quickly accumulate.
These deals vary in nature from the interest rate perspective. A borrower with a higher credit score will get loans at near-zero interest rates. Let's segregate deals based on credit score range,
The big question is, why do lenders emphasize so much on the credit score aspect? The fact is that these lenders want to assess the credit risk that is the risk involved in lending to you. They get a better idea of the level of risk they are about to undertake, if they decide to lend you and whether they can take that amount of risk.
A credit score tells everything about your history of repayment for all the loans you have taken in the past. If you have a low credit score, then the chances are high that you will have a tough time repaying it, raising many red flags.
What about the borrowers with a low credit score and want to buy a car for their family? There are options for car financing as well for this category of bad credit borrowers.
There are chances that with a bad credit score, that your loan application will be rejected, but it is not necessarily true. Established commercial banks with a long history are bound to reject your loan application, but alternative modes of financing in the likes of direct lenders in the UK present online.
You might have to pay an additional interest rate higher than what they would have charged you if your credit score would have been higher.
Thus, if you have a low credit score, then don't apply for a car loan with a bank; instead, start research for lenders in the UK who offer loans to bad credit borrowers.
Mentioned below are some of the tips which could help you get a loan quickly and easy repayment: