Driving makes our lives so much easier; we can get from place to place without having to rely on public transport, or other people – we can go where we like when we like. Unfortunately, purchasing a car is not as simple for some of us, especially if you struggle with your finances. There are many financial aspects to consider when buying a car, like down payments, finance, running costs and insurance. Thankfully, there are a range of finance options you can choose to make it possible for you to purchase a vehicle, like car finance bad credit and Pay-as-you-go car finance, which we will look at in more detail below.
What is pay-as-you-go car finance?
Pay-as-you-go car finance allows those with bad credit to buy a car. If you have a low credit score, and you’ve struggled to make repayments in the past, you may find that it is more difficult to be approved for loans such as car finance – this is where pay-as-you-go comes in. If you cannot afford to pay a standard car finance agreement each month, or your chosen lender will not approve you for one, applying for a PAYG loan means you will be able to benefit from a car to get you from A to B without putting additional strain on your finances.
How does it work?
So, if this sounds like a policy that you could benefit from, you’ll need to know a little more about how it works. Taking out a pay-as-you-go car finance loan doesn’t just mean that you can benefit from a new car when you need it most – you will be supplied with a black telematics box that will be installed in your new car to prevent you from driving when you shouldn’t be, like if you miss a repayment.
Your pay-as-you-go finance will require a one-off outright payment, followed by payments that you will be charged monthly. Usually, these PAYG loans are based on hire purchase, which means only when you have made all the repayments in full, the car is yours. The amount that you pay for your PAYG finance depends on how much you drive, and the mileage that you disclose to your chosen lender.
Are there other car finance for bad credit options?
Yes. PAYG car finance isn’t the only option for those with bad credit. Other lenders will approve your finance application even if you have struggled to be approved for loans in the past. All you need to do is find a lender that can help you. Generally, car finance lenders for those with bad credit may ask for proof of earnings, like a few of your previous payslips. You may also be asked to share banking details to that your lender can get a better idea of how creditworthy you are. Be prepared to show your lender that you can afford finance repayments – and you’ll be behind the wheel in no time.
What is the approval process for car finance with bad credit?
If your credit score is low and you’ve decided to take advantage of a bad credit car loan, it’s best to know what to expect when it comes to the approval process. Unlike other loans, your lender will not use your credit score or history to make their decisions – as mentioned above, they will use bank statements, identification, and proof of income and they may need details of your universal credit if applicable. The process can be quick and simple if you have these documents ready. Your lender will be able to decide quickly once you have submitted your application. And don’t worry – because these loans come from lenders, they make human decisions based on your lifestyle and affordability, not solely on your credit score.
Will these options improve my credit rating?
If you’ve chosen PAYG or bad credit car loans because you are struggling with your finances, or you have a bad credit history, they can help to stand you in a better position when it comes to your credit score and being viewed by lenders in the future. Ensuring that you make the repayments towards your car finance every month, on time and in full, is a step towards improving your credit score. Of course, this could also work the other way too. If you fail to meet the payment requirements on your chosen finance option, you could end up worse off when it comes to your credit score. You should make sure that you can make the finance repayments each month so that you can build your credit score and financial reputation.
What are the benefits?
There are a few advantages that come with car finance for bad credit options such as:
- If you are struggling to be approved for finance options because of previous bad credit, pay-as-you-go finance and bad credit finance lenders can allow you access to a new car quickly and easily.
- As we’ve mentioned above, making payments towards your chosen finance each month means that you can work on improving your credit score for the future whilst also benefiting from a car to get you from A to B.
- Your car finance payments may be lower than your average lender, with the added advantage of being able to reduce payments even further if you drive safely.
- Payments may be more manageable with PAYG finance, so you don’t have to worry about ending up in financial difficulty with your repayments.
Who can apply?
If you are thinking about buying a new or used car, and you have struggled to be approved for finance of any kind in the past, a pay-as-you-go and car finance for bad credit can be two of the best options for you, as they are both based on your ability to pay your finance monthly, rather than how you have managed to pay in the past. They are also helpful if you need to build your credit score for the future.