A guide to car finance for everyone
Car finance is something most of us will need at sometime of our lives. In fact for most countries car finance is a necessity for people of all ages to buy a car, especially when they are new. However with car finance getting harder and harder due to the current credit crisis it is now much more difficult to get approved for car finance.
Does this mean that most of us will not be able to get approved for car finance? Not at all. It is just that we might need to work a little harder or make an effort to understand what makes banks and lending companies accept or decline potential borrowers.
Car finance providers are looking for people to borrow just as much as borrowers are looking for lenders. Without borrowers lenders are out of business and there would be very little enterprise and not capitalism if nobody could borrow cash.
However banks are not looking to provide car finance to any borrower, they are looking for reliable payers that have a history to back them. If that is not possible they require secured loans where they have a collateral to take if the borrower is not willing to pay.
The secret is to make ourselves look as safe a borrower as we can whether we are young, old, male or female.
If you are young you need to find alternative ways of proving you are a low risk driver as you will probably not have a credit history to show. These are some tips that will help:
Use your parents as collateral. Banks will often take the signature of an additional person on a loan. In case you do not pay your parents, tutor or friend will have to.
Show them your good grades and take advanced driving lessons. Having good grades especially when studying towards a well paying career can be used as security for banks that appreciate having high potential earners in their portfolio. Taking on advanced driving lessons proves you are a responsible and safe driver plus they can be great fun.
What about when your credit record and score is less than perfect? Work is required. Despite the defeatist attitude many hold, there are things you can do to improve your credit. Here are a few:
Take on a secured credit card. Credit card companies will be happy to give you credit if you locate the maximum amount of credit you can borrow in a frozen account you cannot touch unless you terminate your credit. Then use your credit card often and make sure you pay the balance every month. This way you will be creating a positive credit history which will put you in a good position to apply for car finance.
If you are denied car finance don’t continue applying to every car finance company you see. Every time they carry out a credit check this affects your scoring in a bad way. Making it look like you are a high risk customer and desperate.