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Car finance for bad credit people
There are several ways how to get loan for your new or used car even if you credit is not good. Check our comparator and see the possibilities.
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Properties of this loan
- Online loans up to R250.000
- Term 1 - 84 months
- Easy online application
Loan requirements
- Original identification document (must be 18 years or older). If your name and/or surname differs from your identification document, a marriage certificate, divorce court order or name
- change letter will be required
- Latest salary slip
- Any original bank statement showing your latest 3 consecutive salary deposits into an account in your name (an over-the-counter bank statement must be stamped)
About company
More information about the company Capitec Bank Ltd.
Fast information
Properties of this loan
- Online loans up to R100.000
- Term 1 - 36 months
Loan requirements
- Original SA ID
- 2 months latest payslips
- 3 months latest bank statements
About company
More information about the company Letsatsi Finance and Loan (Pty) Ltd
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Properties of this loan
- Car loans up to R10,000.000
- Term 6 - 72 months
Loan requirements
- ID or a certified copy of your ID
- Three latest pay-slips
- One month’s bank statement
- Proof of residential address
- Affordability assessment
About company
More information about the company Iemas Financial Services (Co-operative) Limited
Fast information
Properties of this loan
- Car loans up to R10,000.000
- Term 6 - 72 months
Loan requirements
- ID or a certified copy of your ID
- Three latest pay-slips
- One month’s bank statement
- Proof of residential address
- Affordability assessment
About company
More information about the company LiquidCapital (Pty) Ltd
Has it been your dream to drive a car? Now, more than ever you want to drive that Mercedes hatchback – and soon. It’s a dream you want to turn into reality only that you’re aware banks won’t finance you because you have a tainted credit profile. It could be worse because you might not even have a credit history.
It’s true that banks and most financial institutions won’t work with you if your credit profile has a negative standing. But don’t despair yet. Even if your chances of getting an auto loan are limited, having bad credit doesn’t mean you’re out of options if you want to own a car. There are car financing options for bad credit you can explore.
So, yes! You can still apply for car finance even if you have bad credit. We’ll get to the options you have but first let’s look at what’s car finance for bad credit entails.
What is car finance for bad credit?
Car finance for bad credit is a type of a loan given to people with poor credit profile because they are unable to borrow a loan from banks and other financial institutions. If your credit profile reflects a history of missed payments and huge pending bills, it signals to lenders that you’re a high-risk borrower. The debts you owe and the missed payments will reveal on your credit profile, smearing your credit score.
Once you’re categorized as a high-risk borrower because of bad credit, getting a loan can seem extremely difficult. Banks and other financial institutions will turn you away if you have bad credit. You’d have to look elsewhere as banks wouldn’t be willing to work with you. That’s because banks and other financial institutions have to assess your credit profile to determine your creditworthiness and affordability.
In contrast, car financing for bad credit considers other financing means like income source, employment history, and proof of residence to measure your affordability. Your credit history is NOT a factor with these types of auto loans.
Car financing options for people with bad credit
When it comes to car financing, you have a few options you can explore. The option that’s best for you depends on your financial stability, your credit history, and the type of car you’ll want to drive.
1. Rent-to-own car finance
With the rent-to-own option, you lease the car on a monthly basis for stipulated duration. When the lease term expires, you become the car’s official owner. For those with bad credit, the rent-to-own option is one of the most-friendly approaches. Many dealers want to move the stock in their merchandise. Anyone regardless of their credit status is welcome to bring business. Unlike banks, the dealer won’t do a credit check, making this a favourable option to borrowers with bad credit. However, the rent-to-own option cannot help you rebuild your credit. The dealer does not report your payment history to the credit bureau because it’s a lease agreement.
Leasing period can vary between 24 and 54 months. During the lease period, the car isn’t subject to any interest rates because it’s a lease agreement. However, you’ll be expected to service and maintain the car or pay for any repairs during the lease period. Also, expect the total cost of the car to be expensive because the fees involved can be hefty. How the lease is structured influences the fees payable.
You’ll need to put down a deposit before you can start driving the leased vehicle. But this down payment contributes to the lump sum you’ll pay for the car. The amount to deposit depends with the dealer. Once you clear the agreed payments, the car’s ownership and title will transfer to you. Some dealers will expect that your monthly income reaches above a set threshold.
With this option, you are more likely to choose from older car models unlike other financing alternatives where you get the privilege of choosing from the latest car models. Also, if you miss a payment, the lender can repossess the car.
If it happens you don’t like the car after driving it for some time, you could give it up. But then, you won’t get your deposit back and in some circumstances, lenders will expect you to pay a restocking fee.
Requirements:
- Proof of income.
- Be a South African citizen.
- Proof of Identity.
- Have a valid driving license.
- Have upfront admin fees.
- Upfront fees.
Pros
- No credit checks.
- Easy, fast approval.
- No interest rates payable.
Cons
- It can be costly.
- Comes with no warranty.
- Dealer can repossess the car.
- No credit reporting.
2. In-house car finance
Dealership financing is yet another favourable option if you have bad credit. The in-house financing option appeals to many potential car owners with a poor credit history. Those who would have a hard time getting a loan through traditional means. Also, it’s appealing to people who don’t have the financial means to pay for a deposit. With in-house financing, you can drive either a pre-owned car or a brand new.
With this option, the dealer finances the car – you’ll repay the dealer in instalments with extra fees. The in-house dealer will finance the car privately, mostly through an accredited bank. In –house dealers mostly have an established credit history with financial institutions. As for you, they’ll not review your credit reports. The only critical factor is your ability to make monthly payments.
The interest rates payable can be costly, staggering as high as 20%. But you could look at the bright side – which is, with in-house financing you can rebuild your credit history. Dealers share your track record with credit bureaus. But prepare to pay exorbitant fees.
Requirements:
- Be a South African resident.
- Proof of income.
- Bank statements (3 months slips).
- Have a driving license.
Pros
- Friendly option to bad credit consumers.
- Helps rebuild credit history.
- You can drive a new car.
- The car might come with warranty and auto insurance.
Cons
- Costly interest fees.
- Expensive option.
How to get approved faster
If you have bad credit, here are some tips to improve your chances of getting approved faster with different car financing options:
- Get your paperwork ready. Doing so demonstrates to the lender you’re organized and responsible. The first impressions the lender has of you will go a long way in solidifying the deal.
- Put down a deposit. You want someone to finance your car purchase; demonstrate that you’re serious and you can afford to pay off the loan. This approach works well, particularly if you have a tainted credit history such that it rings red flags to lenders. Putting down a deposit gives your dealer some leverage and peace of mind because you’re already a high-risk borrower. But anticipate paying sky high fees on interest rates.
- Get a co-signer. If you can find someone with a good credit profile, have them vouch for you by signing the lease agreement.
- Build your credit profile. Although you want to drive that car, it makes sense to first make an effort to rebuild your credit profile. Find a way to start paying off the debts you owe. You could consolidate your debts so that you’ll pay lower monthly payments. Debt consolidation is when you roll all your existing debts into one manageable debt. And then Work towards paying off this one debt.
You only have to keep up with the monthly payments – your payment history will begin to reflect in your accounts, within 3 months. Once the car dealer sees you can afford to keep up with the outstanding monthly payments, there is a good chance they will approve your auto loan application.
Final thoughts
Having bad credit shouldn’t make you shy away from wanting to own a car. You only have to know where to look. Banks will straight up not work with you if you have bad credit. But you can explore different car financing options structured for people with bad credit. And as you explore these alternative options, be sure to keep rebuilding your credit profile by paying off other existing loans.
Lincoln Ndirangu(LinkedIn)Lincoln Ndirangu is a professional freelance web copywriter based in Nairobi, Kenya. For over 7 years, writing for the web and engaging the online audience has been primary focus and passion.More information...