Bad credit car finance

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Introduction to bad credit car finance

Bad credit car finance is a type of loan available to those who have a poor credit history and have been unable to borrow elsewhere. Car finance covers three different types of finance products, these are Hire purchase (HP), Personal contract purchase (PCP) and personal loans.

Being able to space out payments over a period of time is a great way to fund your next car if you want to avoid paying for a car in one lump sum. Just like any type of loan, interest rates will apply so make sure to compare providers to find the right deal for you.

How to get car finance if you have bad credit?

If you have a poor credit rating, or simply no credit at all, it can be difficult to get a car finance agreement approved. However, you do have some options. Some specialist lenders offer finance to people with bad credit.

You can compare a range of car finance deals and providers aimed at people with bad credit at We'll show you your likelihood of acceptance and how much you can expect to pay, without affecting your credit score.

Get your credit report

Okay, so you may have a “bad” credit score. But what does “bad” actually look like? To get a decent view of your credit history, use a credit check service. This should tell you about any active credit, missed payments and people who are financially linked to you.

This is a good place to start. Make sure all of your details are correct and up-to-date. Not only does this help when lenders do credit checks, but it’ll also reduce the risk of fraud.

Couple with bad credit reviewing paperwork
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How your credit rating impacts your chances at getting a car on finance

In a nutshell, your credit rating is a score that reflects how good of a borrower you are in the eyes of a lender. Lenders never see this score – all they can access is your credit history. This will give them an indication of how good you are at managing your money.

People with a poor credit history may find that lenders offer them higher interest rates or poorer lending options. Some may refuse to lend to you altogether. Fortunately, there are ways you can improve this score over time, increasing your chances of getting car finance. While it can be time-consuming, this has the best long-term benefit.

Other ways to improve your credit rating


Cut ties with those who have bad credit

bad credit car finance sever ties

You may have an old joint credit account with someone who has since fallen into bad credit. In cases like this it’s possible that the black mark against their name is dragging you down. If you want to sever ties with these people financially, you’ll need to issue a notice of disassociation. After some checks, credit reference agencies should be able to remove this person from your file.

Register on the electoral roll

bad credit car finance electoral roll

When lenders do credit checks, they’ll check your name and address. Being on the electoral roll makes this process much easier for them, and also helps to reduce the risk of fraud.

Pay debts off in a timely fashion

bad credit car finance pay debt time

If you’re trying to borrow money, having an already-growing debt isn’t going to do you any favours. Keeping up with your repayments is a good sign to lenders that you can borrow responsibly. This will – over time – help to improve your credit score.

Increase your deposit

bad credit car finance increase deposit

With finance deals like hire purchase or personal contract purchase, you’re usually asked to put down a deposit. Normally this can be around 10%, but it’ll vary depending on what deal you’re after. Putting a little more money down at this stage could help the lender’s confidence in your ability to make repayments. This in turn may result in a better interest rate for you.

Have you considered a guarantor loan?

While a number of companies specialise in loans for people with bad credit, there are a few drawbacks to this. The problem with many of these is that interest rates can be comparatively high. One alternative is a guarantor loan, where you get someone who trusts you to act as your guarantor. If you can’t make the repayments for whatever reason, the debt passes to them.

This method poses less of a risk to lenders and so tends to offer better interest rates than short-term loan companies. This isn’t something to go into lightly, as being a guarantor is a hefty responsibility. If the guarantor is unable to shoulder the debt, both you and your guarantor could face legal action. If you’re in doubt, speak to a financial advisor.

Need more help? Take a look at our expert guides

Cancelling your car finance early

A look at your rights of voluntary termination.

Can I sell a car with outstanding finance?

What you need to know before you sell your car.

Car finance for young drivers

Just passed? Here's how to finance a car.

Your options explained

Confused about your options? We're here to help.

Personal contract hire explained

Everything you need to know about PCH.

Car finance traps to avoid

Common problems to watch out for.

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