Sunday, February 12, 2012

Guide to Financing a Car with Poor Credit

Many Britons are struggling to cope with the high cost of living amid troubling economic conditions. As fuel, food and energy prices continue to soar; it is becoming increasingly difficult for people with poor credit histories to purchase new or used vehicles. Fortunately, companies such as Car Finance 247 are able to offer finance to people who have a history of bad credit.

A somewhat perverse consequence of the credit crunch and recession has been that creditors are more circumspect of how and where they lend money. People with relatively good credit histories are being turned down for loans and credit cards that they might have easily acquired several years ago, so what hope is there for people with poor or non-existent credit histories?

As mentioned above, there are several finance companies in the UK that provide solutions to those whose credit histories are not quite as shiny as a new car. The first step towards purchasing a car through a specialist finance firm is to find out more about your credit history. Applying to credit agencies such as Experian and Equifax can enable a person to review their credit profiles, which may include erroneous or out of date information. After cleaning up a credit profile, a process that can take several months, it is necessary to apply for a finance deal.

After an application has been received by the finance company in question, it should be processed in a manner consistent with the firm's terms and conditions of sale. Some of the leading finance companies in the UK provide solutions for people who have CCJs, mortgage defaults and so on, but obviously each company will make an effort to ensure that a finance deal will be repaid on time. As such, each application is likely to be subjected to various tests before being accepted. Tests will include obtaining proof of address and income.

If finance deals worked on a credit-only basis, no person with a poor credit history would be able to avail of them, which is why the finance companies are probably more interested in an applicant's ability to repay than default credit card payments several years ago. On this note, it is necessary to highlight the somewhat obvious point that no firm is likely to offer finance to an applicant who wants to borrow or buy more than they can afford to repay.

During the acceptance process and assuming an application is not rejected, a finance firm will usually consider all relevant details before passing the application to a sales team. Underwriters will then discuss various details with the applicant in order to establish exactly how much can be financed. Applicants are advised to be realistic at this stage. While they may very well want the latest BMW or Mercedes, underwriters will do their best to find the best, most affordable deals available.

Finance companies will also charge an interest rate on credit deals, so applicants ought to be aware that repayment figures will include a 5-20 per cent charge, depending on circumstances. In summary, finance companies are useful in that they are able to offer solutions to applicants whose poor credit histories would probably exclude them from obtaining credit from the bank or any other established lender.

Louis Rix is marketing director of

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