How to get car finance with bad credit

How to get car finance with bad credit nz
How to get car finance with bad credit nz

So you’ve got bad credit. Debt can be a burden however we all make mistakes and its not end the of the world. Fortunately there are steps you can take to position yourself better.

The idea is to change from a high risk customer to a medium/low risk customer. If you can follow the ideas below, you’ll be on the right track so stick in there and get to it. It will take a few months at least but you’ll be in a better position financially and hopefully you’ll have that car you’re wanting.

Settle any outstanding debts before you apply

Nasty credit cards – Gone!

Hire Purchase – Gone! 

Get rid of all those pesky, monthly payments that are taking away your disposable income. No monthly payments means those expenses instantly jump over to your savings so focus on paying them off before you apply for car finance. Less debt equals lower interest rate and more chance you’ll be accepted for car finance.

Your affordability (income minus expenses) helps determine whether you get approved for car finance and what your interest rate will be so the less expenses you have the better off you will be.

Helpful Tip: Rather than paying off your credit card and closing the credit account, keep it open but keep the balance at around zero. This will demonstrate you have financial control and will benefit you when applying for car finance with bad credit.

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Save so you have a deposit

And following on from above, all the money you save from getting rid of those weekly or  monthly bills will help you save for a deposit which will show lenders you have disposable income and can save money. 

Another big bonus by having a deposit is that you will borrow less so will owe less in the long run. A deposit is highly recommended and will give you valuable points on your way to a better car finance rate.

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Be in full time or long term employment

You’ll want to show the lender you are a stable customer so being in full time employment will benefit your cause, especially if you have been working for the same employer for a year or more.

If you have jumped from job to job and/or been unemployed in between you’ll be more of a high risk customer and your chances of securing a loan will be less.

If your employment is not full time, thats fine as well however your income level and length of current employment will be even more important.

A peson with part time employment which is a contract lasting 6 months will be less likely to secure finance than a person with ongoing part time employment.

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Super charge your 3 month bank statements

When you apply for car finance most lenders will require you to present 3 months/90 days of bank statements so they can verify your financial situation, your income and expenses.

If your situation is not urgent and you can wait 3-4 months you can apply the following to super-charge your bank statements and increase your chances of car finance approval and securing a lower car finance interest rate:

  1. Regular income payments
  2. Limit your expenses ie; necessary expenses, not luxury items
  3. Get a credit history report so you know exactly what is listed
  4. Have paid off bad debts (prior to starting your 3-month super charge)
  5. Pay off any credit card debt you have outstanding
  6. Show regular savings deposits to a savings account. Deposits don’t need to be huge, just regular

If you can combine the above over three months you’ll have a much stronger case for approval and a low interest car finance rate.

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Check your credit rating

Make sure you check your credit rating and know exactly where you stand. You may have unknown, outstanding debts which you’ll need to settle before applying for car finance. Your credit rating can be accessed free of charge using any of the below options.

The better you can get your credit score the better your interest rate will be and you’ll be more likely to get approved for car finance.

Try any link below to get your credit score report for free:

www.centrix.co.nz/my-credit-score

www.creditsimple.co.nz

www.creditcheck.illion.co.nz

www.mycreditfile.co.nz/products/my-credit-file

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