Bad credit car finance in Ireland is available from car dealers. There are two types of car financing deals that they offer: hire purchase and personal contract purchase. Hire purchase is similar to personal loans. You will be required to pay down the debt over an extended period, but the title of the car will be transferred only after the full settlement. Personal contract purchase only covers the depreciation cost, and hence, you are required to make a balloon payment in order to obtain the title.
If you are looking for car finance with bad credit in Ireland from a direct lender, you will need to apply for a car loan. Direct lenders offer auto loans instead of hire purchase and personal contract purchase.
What are car loans?
Auto loans are personal loans, meaning they do not require any collateral, as the car you purchase itself serves the purpose of collateral.
Car loans are more affordable than car finance deals from dealers. You will have to pay a deposit of about 10% of the car’s value. If your credit score is substandard, you might be required to arrange a bigger deposit. The repayment length of these loans is up to five years, depending on the value of your car and the size of the down payment.
Every month, you will pay down a fixed instalment, but there are no limitations or restrictions on the mileage of your car. You can drive it the way you want. Ownership remains with you, but your lender will have the upper hand. If you fail to discharge the debt, your car will be repossessed by your lender to cover their money.
How do direct lenders offer bad credit car loans?
Here is how lenders assess your application for a car loan with bad credit:
- Assessment of your credit application
Car loans are large loans, so most lenders would like to peruse your credit application individually. Even though you arrange a bigger deposit, it is essential for lenders to carefully check your repaying capacity. They will check your income sources to know whether your budget has the potential to keep up with payments.
Other considerations that influence the lending decision include:
- Your credit utilisation ratio
- How much debt do you owe?
- Your current monthly expenses
- The number of dependents
- A backup plan in case your income plummets
Car loans with bad credit come with high interest rates. Even though lenders examine your future financial condition, it does not guarantee that you will not struggle with payments at all. You should also carefully assess your repaying capacity.
- Flexible loan structure
Direct lenders in Ireland offer flexible repayment terms based on your affordability and income sources. The repayment term of a car loan varies between 12 months and 5 years. The repayment term for two borrowers with the same credit rating and down payment will likely be different due to the difference in their income sources.
If lenders suspect that large monthly instalments can strain your budget, they will reduce their size, which, in turn, leads to an extended repayment plan. It is suggested that you choose only a longer repayment plan when you cannot afford large monthly payments, because a longer repayment period leads to increased interest in total.
At the time of comparing the cost of a car loan, you should keep this factor in mind. Sometimes, it is more logical to choose a shorter repayment term than a longer one.
- Fast approval
Car loans take a bit longer to complete the process as compared to small emergency loans. All applications are processed individually and carefully perused so it might take some time. Even so, direct lenders complete the process as fast as possible. Normally, a car loan is approved within a day or two.
- Trading history is checked for the self-employed
If you are self-employed, you will have to show your trading history as proof of your income. Your trading history is evaluated to analyse the stability of your business.
In addition to a 12-month trading history, you will need to submit your bank statement too. Lenders would like to carefully assess your personal expenses to know whether or not you will be able to repay your debt or not.
Tips for improving your approval chances
Here is how you can ameliorate your approval chances:
- Check your credit report to ensure that you do not have errors that result in a lower credit score.
- Offer a guarantor whose credit history is excellent.
- Reduce existing debts to demonstrate your repayment potential.
To wrap up
Lenders will evaluate your credit report and income sources before approving bad credit car loans. At the time of using these loans, you should carefully analyse your repayment capacity.
