Bad credit car loans: What are my options and how do I get one?

Bad Credit Car Loans: What Are My Options And How Do I Get One?

Sometimes it’s easy to get a bad credit rating. Perhaps you have defaulted on a loan, been late on a credit card bill, or even forgotten to pay a utility bill on time—any of these could harm your rating. Moving often, being employed irregularly or changing jobs could also have an impact.

You may not even realise that you have bad credit until you apply for a car loan. If you apply for a standard loan with a bad credit score, your application will likely be rejected. That’s why we’ve put together this guide to help you overcome the frustrating hurdle of bad credit and get the car loan you need.

How do I find out my credit rating?

If you haven’t yet applied for a loan and want to know your credit score, or if your loan application has been denied and you’re not sure why, here’s how you can find out your credit rating, often for free:

  • Visit a free credit scoring website
  • Contact a nonprofit credit counsellor
  • Check with your current loan provider or credit card issuer

What are my car loan options?

Don’t despair if you are having trouble getting a car loan due to bad credit—there are still options. A co-signer could help you secure a loan and a loan broker could help find one. You are less likely to get an unsecured loan, so a secured loan (where your car acts as collateral) might be the best option. Many lenders are willing to overlook your past credit rating for a secured loan—so that you can still buy the car you want.

If you already have a car, selling it could help you to reduce the size of the loan you need—check the value of your existing car with our free car valuation tool. If none of these car loan options work for you, you could consider using a car subscription service while you work to improve your credit rating.

What should I consider when choosing a loan?

If you have bad credit, you’ll likely be offered a loan with a higher interest rate. We recommend that you shop around for the best deal, taking into account fees, the length of the loan, your regular repayment amount and whether the interest rate is fixed or variable. You may wish to take out a loan with car loan insurance. This means in the case of unemployment, your loan repayments will be covered for a while.

How can I improve my credit rating?

To help get back in control of your finances in the long term, the following techniques can help you improve your credit score:

  • Paying your bills before the due date
  • Staying at one address longer
  • Maintaining steady employment
  • Paying off your car loan reliably

Having bad credit doesn’t necessarily mean that you won’t be able to get a car loan or will need to pay super-high interest rates. Once you have found a loan that works for you, there are some amazing car deals to be found on Gumtree. Search today and you will be behind the wheel of a car you love in no time.

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