In the UK, securing car finance if you have bad credit, are self-employed, or are unemployed, can be challenging. However, it is not impossible. Here’s a closer look at how each scenario may impact your ability to get car finance:
Understanding bad credit car finance
Bad credit can be a result of various factors such as missed repayments, County Court Judgements (CCJs), or never taken out credit before. While having bad credit might restrict your options, there are specialist lenders and brokers that cater specifically to those with poor credit histories. They may offer higher interest rates due to perceived risks, but they can be a viable solution if you’re in need.
Are you self-employed?
Being self-employed can sometimes be seen as a risk by traditional lenders because the income may not be as predictable as that of a salaried employee. However, the rise in self-employment in the UK has led many lenders to adapt their criteria to accommodate this growing segment.
When applying for car finance as a self-employed individual:
- Proof of income: Lenders typically require at least two years of trading accounts or tax returns to demonstrate a consistent income. Some might accept bank statements as supplementary evidence.
- Healthy deposit: Having a substantial deposit can enhance your chances of being approved as it reduces the lender’s risk.
- Consider a guarantor: If you’re concerned about approval, having a guarantor with a good credit history can help you secure a loan.
Are you unemployed?
Unemployment poses a more considerable challenge. Lenders want assurance that you’ll be able to repay the loan, and without a regular income, this becomes a significant risk for them. However, there are a few scenarios where unemployed individuals might still secure finance:
- Alternative income sources: If you have other consistent income sources, such as rental income, investments, or benefits that are sufficient and provable, some lenders might consider your application.
- Guarantor loans: Some lenders might approve your loan if you have a guarantor who agrees to cover the repayments if you default.
- High deposit: As with the self-employed, offering a sizeable deposit can mitigate some of the lender’s risks.
If you’re in the UK and fall into one or more of the categories mentioned above, securing car finance may be more challenging but not unattainable. It’s crucial to shop around, do your research, and approach specialist lenders or brokers who might be more understanding of your situation. Remember to always read the terms and conditions, understand the interest rates, and ensure that the monthly repayments are affordable for your circumstances before committing.
🚗 More information: Can I Apply for Bad Credit Car Finance if I’ve Been Previously Declined for a Loan?
