- Posted 07 Jan
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If you’re in the market for a new set of wheels, you’re most likely going to need to take out a car loan. For many, this won’t be much of a problem, as dealers are willing to do whatever they can to cut you a deal to move their cars.
If you have bad credit however, you might face some obstacles to securing your new ride. Dealers will still be anxious to cut you a deal, but you might have to show some additional paperwork to show that you can make the payments in spite of your negative credit history. And then in some instances, they might choose not to lend to you at all.
Here are some tips to prepare you for securing a car loan, even if you have bad credit.
1. Know what you’re up against
Even if you have a bad credit rating, you can still manage to access a car loan. Be prepared though, as a car loan professional is going to want to see documentation that you would probably not have to provide if you’re credit was good.
Overall, you’re going to need to show that you have taken action to improve you’re situation. You may have to explain any defaults with regards to your credit history. In some cases, you may have to face the reality of a higher interest rate as well.
2. Be prepared to show bank statements
If you have bad credit, it’s more than likely that your lender will want to see that you are in good standing with regard to your financial affairs outside of your basic credit line.
They may want to look at your bank statements to verify that you have money in the bank, and that you are meeting you’re obligations financially with your bank.
The lenders will look at such things as other loans you might be paying off, and whether or not you have any overdrawn accounts.
Have your bank statements from the last three months ready to show to your lender and make sure they are in order – no overdrawn amounts or missed payments during that period.
3. Avoid getting many, smaller loans
When you apply for any type of loan in Australia, the application process is documented, whether you’re approved or not.
Any lender will be able to see if you have any loans you are paying off, and this can have an impact on whether or not you are able to secure your car loan.
Small loans, such as “payday” loans, could hamper your ability to secure a car loan. They are not desirable in the eyes of your car finance professional.
If you’re taking out these types of loans, the lender will interpret it as an inability to pay your bills on time. Be cautious and if you do have a number of these loans, ensure they are paid off prior to applying for a car loan and that you can demonstrate your ability to meet your current financial obligations.
4. Make sure Bankruptcy has been discharged
If you’ve declared bankruptcy, you will not be able to get a car loan until the bankruptcy and/or debt agreements have been completely discharged.
You will need to have been discharged from such debt agreements for at least 12 months.
If you haven’t been discharged yet, take that time to make sure your financial affairs are in order so that you will be able to secure a loan when the time comes.
Need help with your car loan or car buying? Speak to one of our team today and find out how we can help you, no matter what your credit history situation.