Banks and other lenders reject people for finance due to a number of different factors. These people are often refused because they have defaulted on loans, were late in paying bills or have just run into bad luck. Others may have no credit history. What this all adds up to in the eyes of financiers is risk.
Financiers don’t want to take on risk because it means they have lower chances of getting their money back. They want every single assurance they’ll receive their money on time and in full. This is why “mainstream” lenders such as banks and credit unions will only accept applications from people with “clean” or “good” credit. Refusing the higher risk clients keeps the interest rates as low as possible for them. People in this category are in the “prime” lending category.
Below the “prime” category is the “sub-prime” lending category. This is given to people who have sketchy credit histories, low residential stability (i.e., move around a lot), recently discharged bankrupts or Part IX Debt Agreements and people without full time, regular employment. People in the “sub-prime” category have more working against them when it comes to applying for car finance. As part of responsible lending practices, financiers and lenders often have no recourse than to charge higher than usual interest rates. These Bad Credit Car Loan interest rates can range from 19% to 30% per annum (p.a.) These rates are steeper but there is always a positive being approved for such loans.
By paying back your loan on time and in full each week, fortnight or month, you will be repairing your credit history. In as little as a year, your credit report will show signs of improvement. In time, you may be able to refinance your bad credit car loan with a trade in (click here for more information on refinancing bad credit car loans.) You may be eligible for the “correctible credit” category, a stepping-stone to “good” or “clean” credit. Having good credit again is very achievable. Some short-term pain now will reap you many rewards in the future, especially if you’re aiming to take out a mortgage.
If you’re in the market for a car and need a second chance at finance, talk to the professionals at Bad Credit Car Loans. We have a wealth of experience and can find a loan product that’s right for you and your situation.