Unsecured car loans for people with bad credit

An unsecured loan is one option for getting car finance for bad credit. The unsecured part of an unsecured loan means that you, the borrower, doesn’t put up any security (usually property) against the loan in the case of defaulting on the loan. That doesn’t mean it’s ok to default on an unsecured car loan, lenders do chase non-payers and court appearances and CCJs can ensue.

Because this type of car loan is unsecured, the interest rate is higher than for a secured car loan. the amount of interest you will pay depends on the lender’s assessment of your financial circumstances. If you’re applying for an adverse credit car loan, the interest rate will be higher than if you had an excellent credit history. This is because the lender perceives borrowers with a poor credit history to present a higher risk of defaulting on their repayments. Whether you’re applying for a bad credit car loan or any car loan, the following are essential:

• Be at least 18 years of age
• Full time employment (or self-employed depending on circumstances and lenders’ criteria)
• Proof that you can afford the repayments

Bad credit car loans amount

Adverse credit car loans are usually made available for amounts from £500 to £20000. The amount borrowed is usually 90% to 100% of the value of the car. Unfortunately applying for a loan for £20000 doesn’t guarantee getting it; lenders assess each car loan application individually, taking into account income and ability to make the repayments. So, it’s easier to get a loan for a lower amount, but if you have a substantial income it certainly helps.

Bad credit car loans interest rate

The interest rate, or APR, on poor credit car loans are determined by the circumstances of the loan applicant. Unsecured car loans between £15000 and £20000 tend to attract a higher interest rate because of the larger amount being borrowed. When applying for a bad credit car loan, the interest rate you will be offered is determined by the information you provide in your loan application, including you past credit history. Don’t worry if you have a  poor credit history, you can still get a car loan, and keeping up with the repayments is a great way to improve your credit score.

Bad credit car loans repayment term

The car loan repayment term is the length of time you are making repayments, typically 1 to 5 years. You can significantly reduce the amount you repay on your bad credit car loan by having as short a loan term as you can. Since you pay interest with each repayment, the fewer repayments you have, the less interest you will pay. Therefore, pay as much as you can each month while still being able to live comfortably. That way, you’ll save money on interest and have the great feeling of having paid off your loan and owning your car outright much sooner!