Applying For a Bad Credit Car Loan
Written by Phillip Gruppelaar
Understanding the best way for someone to obtain a Car Loan or Car Finance if you have previously had bad credit or have been defaulted by your Utility provider can save you a lot of time and frustration.
There are a number of financiers who are prepared to give people a “second chance”
Firstly, a word of caution. If you have a problem on your credit file, the financier who will approve your loan in most cases is going to charge you more than anyone with good credit. So it is advisable to keep your loan at a lower level e.g. under $25,000 so that you can readily afford it and don’t get weighed down with the interest and charges.
Below is a series of things you should do, things a financier will need and some information for your benefit to assist understanding your situation.
Tell your Finance Broker Everything.
You may have heard the saying “honesty is the best policy” There is no other way, if you really want to get a Bad Credit Car Loan Approved
It is critically important when applying for a bad credit car loan that you are totally honest about your personal circumstances. No matter how bad you think your past sounds, your broker must know what has happened.
There are several reasons for this
1. If a prospective lender finds out something you have failed to tell them, they will decline the loan.
2. If you have bad credit with a particular financier, they won’t lend you money again. There are plenty of lenders, you want to be dealing with one that has no bad memories of you.
3. If something was out of your control, you can work with a credit repairer to have the bad credit reference removed from your file.
Repairing Your Credit File
“In 2012 over 100,000 errors were registered on Australian’s credit files”
With your permission your credit file can be accessed to see if it is accurate.
We can help you develop strategies to improve your credit file overall, such as by clearing up any errors.
Any professional bad credit broker will have access to a professional credit repair service, who work with banks, finance companies and Utilities providers every-day to negotiate removing bad credit reference from your credit file
This simple proactive action will go a long way to improving the presentation of your credit file, and therefore improving the approval chances of your loan application.
Unfortunately, if you are currently bankrupt, most reputable lenders won’t consider your application for vehicle finance. A Discharged Part IX (Debt Agreement) applicant can obtain a Car Loan immediately on discharge, provided they meet all other approval criteria that the financier sets. (e.g. employment and income)
A Part X Bankruptcy (Where no agreement is made to repay outstanding debt) you will normally be required to wait 6 months before a financier will lend to you.
If after you have been discharged from any form of bankruptcy you default on any loan or Utility bill, you are not going to get a loan.
What you weren’t told about your debt Agreement (Part IX Bankruptcy)
Almost every person who approaches our organisation (Harley Finance) is either confused about the debt agreement they have entered into or the explanation they received didn’t make them fully aware of the ramifications of the debt agreement.
As a rule of thumb; If you have entered into a debt agreement where.
1. Where any further interest has been waived
2. The agreement periods change for your outstanding loans
3. The money is paid to third party, not the people you actually owe
4. You have probably entered into a Part IX Bankruptcy Debt Agreement.
Bad Credit (no Bankruptcy)
Most other forms of bad credit don’t automatically disqualify you as a candidate for car finance.
It is definitely worthwhile speaking to a specialist broker to discuss your personal situation. A specialist Bad Credit Car Loan Broker can provide vital insight into how best to structure your application.
Having a previous or current poorly conducted finance agreement or loan or a default on some sort of utility bill means any financier is going to scrutinise your application very closely.
The most common way of doing this is to check your last three months bank statements, loan statements or credit card statements (if applicable)
Your banking conduct and transactions tell the prospective financier a lot about you.
1. If you allow your bank account to run into the negative
2. If you have dishonor’s on your statement
3. If you have any direct payments coming out of your account that you haven’t disclosed
4. Your actual pay for the last 3 months
5. Any Centrelink or other benefits you have paid
6. Any dealings with payday lenders
7. Indications of excess gambling
8. Your ability to live within your means. A small amount of savings each month assists greatly.
Point 1 to 7 can adversely effect on your application.
Point 8 will enhance your application
Any prospective Financier sees regular savings in the same way they see good credit.
Other Loan or Credit Card Conduct
Every Financier likes to see evidence that you treat your current debt obligations seriously. If you have other loan or credit card debt at the time you submit your bad credit car loan application.
Most will want to see those records as well. Ideally, your records would show that you make you repayments on time and, in the case of credit card debt, by an amount greater than the minimum required monthly payment.
In some circumstances, with an appropriate explanation and supporting evidence, some loans will be approved with less than perfect loan or credit card conduct.
Your Employment Status and History
If you are unemployed and your sole source of income is unemployment benefit you will not get approved. The payment you receive simply isn’t enough to prove you can afford loan payments.
Financiers look for stable employment – whether it be casual, part-time or full-time. In the case of casual employees, stability in both job and industry is a distinct advantage. A minimum of 6 months or more would be ideal.
This gives the financier comfort of continued income from your job, and hence your ability to meet your repayment obligations.
For part-time and full-time employees, it most cases you will need to have completed any probationary period stipulated in your employment contract. A stable history in both job and industry is viewed as an advantage by financiers.
Your Living Arrangements (Rent, Board etc.)
This may seem irrelevant, but it is a proven fact that certain types of living arrangements are more likely to default. Financiers all work on a point score system. Being a home buyer scores better than someone who rents. A person who rents scores better than a person who lives at home scores better than a person who is a general boarder.
Any-one who lives in a Hotel or Caravan Park is unlikely to be approved.
The longer you have been at the one address the better your points score.
Don’t be tempted to exaggerate your length of residence as there are a number of ways for a Financier to confirm. You will get caught out and seriously jeopardise your chances of approval.
Bad Credit Car Loans get approved every day. Every situation is different, so it is very important that you use a professional bad credit car loan broker like Harley Finance. Doing this will give you your best chance of approval.
Remember you have had problems in the past, so the financier is going to charge you more. A person who has defaulted previously is statistically eight times more likely to default than a person without defaults. They are just covering their risk.
You are going to be asked to supply paperwork to support your application, so get prepared.
If you cannot get approved, don’t despair, ask the broker to put you in touch with a reputable credit repair business. This process normally takes 6 to 8 weeks and then you are in a position to achieve the approval you desire.