You need a new car or your vehicle needs to be repaired. To secure financing, a car loan is needed.
But there is a problem. You yourself assess your creditworthiness as bad. Now you are wondering how you can finance your vehicle or the necessary repair measure despite your creditworthiness problems.
Is it possible to get car loan with bad credit?
The solution to your problem is related to the circumstances that caused your credit rating problems. A common cause is a bad Credit Bureau. The Credit Bureau can be bad because negative features – open or closed – have brought the banking score down. We have dedicated a separate article to car loans with bad credit topic.
Inadequate score and income problems
A bank score that is too low does not have to be caused by negative characteristics. There are a number of other reasons. Very often, the credit history is to blame. In the banks’ view, their creditworthiness can also be poor for reasons that have nothing to do with the Credit Bureau. This means income problems. Either you have no income at all that the bank accepts as income.
This is the case, for example, with social benefits (Social Welfare, unemployment benefits), income from trial work or temporary employment and training allowances. Or they have a regular income from employment, but the income is considered too low. Loan seekers with creditworthiness problems sometimes come up with the idea of looking for loan providers who grant loans without a credit check.
If there is no credit check, my low credit rating is not noticeable and I am rid of all my problems. In fact, you can sometimes find offers for a car loan without a credit check on the Internet. But such offers are either not meant seriously, or it is an attempt to defraud. Credit providers are legally obliged to check creditworthiness to assess the risk of default. Every borrower has to undergo a credit check before approving his loan unless he borrows the money privately from a relative or acquaintance.
Car loan despite negative creditworthiness: Proper preparation is crucial
The financing of a new car can in most cases be planned in advance. There is usually enough time to spice up the score before taking out a car loan. A prerequisite for effective measures to improve the Credit Bureau score is obtaining self-disclosure. Self-disclosure is free once a year.
Make absolutely sure that all the information in your creation file is correct. All data about you are used to determine the various score values. The age must be specified correctly and the address must be correct. As far as possible, check whether the deletion deadlines have been met.
If necessary, structure your financial affairs. Eliminate issues that can negatively affect your score. Cancel unnecessary checking accounts. Reduce the number of bank cards and credit cards. Try to return debit balances to your checking account or credit card account.
Small loans, zero percent financing, and installment purchases are common credit traps. Try to clear the liabilities on it. If this is not possible, combine several debts into one loan. Banks often request current bank statements from the past one to three months to check payment behavior, incoming and outgoing payments.
Make sure that the statements do not contain return debits. If necessary, take out the loan a few months later. Create a rough budget statement. What expenses do I have per month and how much do I earn? The difference between income and expenditure is the amount available to pay off the monthly installments.
Can you make a deposit? With a down payment, you reduce the bank’s risk of default and thus increase your willingness to lend. A similar effect arises when you trade in the old vehicle and take out the loan through the dealer (dealer financing).
With low incomes, there is often nothing left but to choose long terms. Although this increases the overall cost of car financing, long credit terms are often the only way to obtain a car loan if there are creditworthiness problems. If the income is low or there is no regular income from employment at all, another borrower may be required.
The co-signer, like the first signer, becomes the bank’s contractual partner. If both signatories have regular income from employment, the bank takes an overall view during the credit check. The income ratios of both signatories count. If only one signatory has income, for example, the first signatory is unemployed, only the creditworthiness and economic performance of the signatory with income count.
Who grants car loans despite poor credit ratings?
The credit rating requirements for car loans are not as high as for other installment loans. That is good news. Car loans are regular property loans. These are earmarked credit products that can only be used to finance a specific motor vehicle. The purchase must be regularly proven by the purchase contract.
In the case of a property loan, the financed item serves as security. The bank becomes the owner of the financed motor vehicle by way of security. In practice, the bank receives the Kfz-Brief.
The security provided by the transfer of ownership of the car means that the importance of the bank score takes a back seat. If a down payment can be made, the banks’ willingness to borrow is also improved.
If there are no hard or open negative entries, a weak score will not preclude lending from the outset. Car financing with a poor Credit Bureau is only possible if the economic capacity is sufficient to repay the loan. It is important to have a regular and secure income.
Under these guidelines, dealer financing and car loans from branch banks are not excluded. However, you will often find a broader range of loans with better conditions on the Internet. Sometimes auto loans are possible even when other banks have refused to finance them.
Credit comparisons and credit intermediaries
Comparison portals and brokers work with partner banks, from which they receive commissions. Some of these partner banks have specialized, among other things, on loans with poor credit ratings.
If you use a comparison portal, you can easily identify the providers of loans despite their low credit rating. The maximum interest rates listed in the advertising offer are clearly out of the ordinary, and the same applies to the average interest rate in the representative example.
We recommend Harrison credit comparison. The comparison contains the offers of all known credit banks. These include financial service providers who grant loans with a low credit rating.
All you need to do a Harrison loan comparison is an application. After sending the credit request, Harrison automatically carries out a credit comparison among the affiliated banks and makes you the best offer. If you value a particularly comprehensive personal consultation, we believe that the credit intermediary Best Lender is more suitable for you.
Best Lender is known for its fair and knowledgeable customer advice. Advice and preparation of offers are free of charge and non-binding.
Credit intermediaries are very reluctant to disclose their partner banks. But when in doubt, all known credit intermediaries and credit comparisons work with the same direct banks. From this point of view, it doesn’t make much difference whether you get a car loan from Harrison or Best Lender.
Good Finance is the leading P2P portal in Germany for brokering loans for private from private.
With the support of the portal operator, loan seekers set up a loan project that private investors can bid on. A credit contract is concluded when the loan request is financed 100% within a certain period. Good Finance accepts low credit customers. However, this group of customers must expect high interest rates.
According to the financial service provider, the existence of a regular income from employment is not essential. For example, recipients of sick pay can also apply for a loan project. A car loan despite poor creditworthiness, financed by private investors, can be requested both from Good Finance directly and via the Harrison portal.