When buying a car with borrowed funds, customers prefer to get a targeted loan from banks. This allows you to reduce the interest rate, which ultimately reduces overpayments and allows you to pay off debt more quickly. Since most of it will be aimed at paying off the principal amount, and not at paying accrued interest. Among the potential customers there are those who are wondering if they will give a car loan with a bad credit history.
Reviews
Many are ready to share their own experience. Among them there are customers who have received approval even if there are delinquencies with previous loans. However, this did not lead to a refusal when applying for a car loan. It is important to confirm your own solvency. In addition, these borrowers are often offered less favorable terms.
The situation is completely different with those citizens who, when applying to the bank for a car loan, have outstanding debts. The presence of current delinquencies in other loans can be a good reason for a banking organization to refuse a potential borrower.
Features
The question of whether a car loan with a bad credit history will be given is usually asked by those who have arrears, unpaid loans or have already faced refusals from several banks. In the latter case, the reason may be that the potential borrower submits an application at once to several financial institutions that issue money at interest.
So, no one can unequivocally answer whether they will give a car loan with a bad credit history. The reason is that the terms of bank loans are constantly changing. The situation in the financial market also depends on changes in the country's economy. That is why even customers with an impeccable history may refuse to issue funds. Each case is individual.
If you have been given a car loan with a bad credit history, especially carefully read the contract. In this case, the bank, working with a troubled borrower, takes on increased risks. In an attempt to compensate them, the credit institution may set a higher interest rate for the client. If for you it is more than twenty percent, keep in mind that this is a disadvantageous offer. It is possible that you will be able to find more loyal conditions. However, this takes time and patience. Also, you will again have to wonder almost the rhetorical question of whether they will give a car loan with bad credit history.
Reasons for refusal
If you previously had problems with repaying a loan, it seems that banks refuse only for this reason. However, in reality, financial institutions have a wider range of reasons for not approving a car loan application. With a bad credit history, the potential borrower has even less chances. Consider the most common causes of failure:
- Low salary. In accordance with the rules, the size of loan payments cannot exceed a certain part of income. This is why potential low-wage borrowers may be denied a car loan. Whether they handle bad credit or not, it doesn’t matter.
- Unofficial work. It is difficult for such borrowers to confirm their own income level. Accordingly, banks treat them with great distrust and often refuse to issue a loan, including a car loan. With poor credit history and delinquency, the chances of getting even worse. However, informal employment alone is already sufficient for refusal.
- The presence of other loans. Such a situation is unacceptable in which the borrower has to give most of his income in payment of bank debts. If the credit burden on a potential client is too high, the risk of non-payment of debt increases and not every bank wants to conclude an agreement with such a borrower.
- No citizenship or registration. This is another factor affecting the refusal of a loan.
- The presence of bankruptcy. If a potential borrower previously conducted a similar procedure, it is likely that the bank will not give him a car loan. With a bad credit history and delays, the chances of approval also become slim.
Advice
There are no banking organizations that would approve one hundred percent of applications for various loans. First of all, they seek to get the maximum amount of information about a potential debtor. Already on its basis, you can draw any further conclusions. Usually, few people work with unreliable customers. That is why it is impossible to say in advance how likely it is to get a car loan with bad credit history.
So, what options do borrowers have? First of all, you need to find out which banks are most loyal to dark spots in your credit history. As a rule, these are small or little-known institutions that are developing a client base and for this reason are ready to meet some problem borrowers.
Also a very important feature is whether a problem loan is closed at the time of applying for a new one or not. If it seems to you that this makes no difference, you are seriously mistaken. If the previous debt is not fully repaid, the probability of getting a car loan with a bad credit history at the bank is reduced to zero.
Terms of receipt
If you have previously had problems repaying loans, be prepared that the offer will not be the most profitable for you. The reason is that banks are wary of such customers. After all, there is always the possibility that delays will occur again.
Being interested in how to take a car loan with a bad credit history, be prepared for more stringent conditions compared to ordinary borrowers. These may include:
- Higher interest rate. In this way, the bank tries to compensate for its own risks and possible costs associated with the return of the debt. For example, in the case of delinquency, operators begin to call debtors, whose work also needs to be paid.
- Lower loan amount. If you have looked at an expensive car in the cabin, be prepared for the fact that the bank will approve a loan for a smaller amount. That is why it is better to look through several options in advance, so that in case of refusal, you should not be upset, but have additional options that suit you.
- Shorter lending period. It is possible that when registering a car loan with a bad credit history in Moscow (or any other city), the borrower will have to agree to a shorter period for repaying the debt. Calculate in advance whether payouts will be feasible for you or delays cannot be avoided again.
- Higher down payment. For banking organizations, this is another way to reduce their own risks. But for the potential borrower - additional costs. Indeed, instead of the standard ten to twenty percent of the cost of the car now, you may have to pay almost half the amount.
Procedure
As you know, getting a loan is possible. However, you have to agree to unfavorable conditions. It is possible that the bank will decide to issue a car loan on bail. With a bad credit history, this is a pretty good option and at least some opportunity to get funds. As a pledge, you can provide just purchased a vehicle or other property owned.
It is possible that it will be necessary to attract a guarantor. That is why it would be nice for a prudent borrower to agree with someone from their friends who have official income and can provide an impeccable credit history.
In addition, the borrower himself must also be officially employed, as well as have an impressive experience. This will allow the potential lender to verify your solvency and reliability. In some cases, you can contact your relatives so that in case of an emergency they ask you to come to your aid.
A car loan with a bad credit history may be denied, but it is recommended to try to prove to the bank that the previous delays were not your fault.
Upon receipt of a loan, it is necessary to pay with a car dealership in two stages. First, the client makes an initial payment, and then the remaining funds are transferred to the dealer by the banking organization.
Possible options
So, any potential borrower has a chance to get approval. However, the presence of bad credit history significantly reduces them, but does not completely exclude them. Even imperfect customers have the opportunity to choose from several options:
- First. To get a car loan without failure with a bad credit history, you need to agree to the terms, even if they are unprofitable. Most likely, the bank will increase the down payment and increase interest. An option with insurance is also possible. For some borrowers, this scenario may seem too complicated. There are alternatives.
- Second. According to reviews, a car loan with bad credit history can be obtained if you do not contact the bank directly, but apply through a dealer. In this case, the organization may not check the credit history at all for the reason that it is a paid service. However, in this case, no one gives guarantees for loan approval. After all, a loan is still issued by a bank, not a dealer organization.
- Third. Get a loan by pledging property. This option is relevant for those who, for example, own real estate. In this case, you can get not a car, but a simple consumer loan. Issued cash can be spent on any purpose, including the purchase of a new vehicle.
Decor
The process of obtaining a car loan for an overdue debtor is no different from issuing a similar loan to any other client. Your task is to hand over the entire set of documents to the manager, paying special attention to certificates confirming the level of income. Be prepared for a surety. For the bank, this is an additional guarantee of repayment of the loan, and for the potential client - unnecessary trouble. After all, not everyone agrees to take on the role of a guarantor, which involves some responsibility.
Usually, consideration of the submitted documents takes place within two days. After that, the banking organization notifies the potential borrower of its own decision. If a refusal is received, you can re-submit the application, but not immediately, but only after sixty days. The result of the consideration of the previous application is not taken into account when re-requesting.
Required documents
When submitting any loan application, the potential borrower has to collect and submit a considerable amount of documents to the bank. Their list includes the following.
- Application form. In it, the borrower indicates personal information about himself. You need to be honest and not mislead the bank.
- Passport of a citizen of the Russian Federation. You need to know that banks do not issue loans to foreign citizens. Car loan is no exception.
- Certificate confirming income over the past six months. The form in which it should be provided is decided by the credit institution to which the potential borrower applies.
- Work record or contract. This document confirms the official work. In addition, the more experience, the more reliable the borrower seems. Accordingly, the chances of getting a car loan increase.
- Insurance contract. According to the conditions, the bank must be indicated as the beneficiary.
Also, the bank must provide documents for the car, namely:
- contract of sale of the vehicle;
- Title
- invoice for the purchase of a car.
In addition, a representative of a financial institution may require a certificate of income of family members, the availability of additional earnings, etc. Such requirements are justified by an attempt to reduce the risks when issuing a loan to a client who has a bad credit history.
Contract clauses
Even having a bad credit history, you should not agree to any conditions. Before signing, experts recommend that you carefully read the loan agreement between the potential borrower and the banking organization. In addition, such an approach will avoid unpleasant surprises in the future.
- First of all, you need to get acquainted with the interest rate. The size of the overpayment depends on this.
- The repayment schedule should not include additional commissions and other fees, which further increase the cost of servicing a car loan, making it less profitable for a potential borrower.
- Make sure there is no additional charge for considering an application, opening or servicing an account, issuing a card, etc.
- Find out in advance whether the bank can unilaterally change the interest rate during the term of the contract you have signed.
- Read in advance the penalties that the bank applies for late payments. For example, with regular delinquencies, a financial institution may raise the interest rate for a client. Debt may cause collateral
- Find out if an additional fee is provided if you suddenly decide to close your car loan ahead of schedule. You need to understand that this is unprofitable for the bank, since it loses a certain part of the income in the form of interest. That is why some credit organizations try to minimize their own losses, providing for penalties for customers for early repayment of debt.
- Pay attention to the possibility of restructuring or refinancing a car loan. Such a need may arise if the borrower makes monthly payments unbearable. In addition, no one is immune from a sudden dismissal. In such a situation, the restructuring will increase the repayment period, but at the same time it will reduce the monthly payment and not spoil your own credit history, which by the time you receive a loan may be imperfect.
Often, a contract for the issuance of a car loan includes a clause on obtaining CASCO insurance for a vehicle. Some banks do not allow it, but as a response, increase the interest rate. As a result, overpayments on a loan can be equal to or even exceed the cost of CASCO insurance. That is why you need to count everything and take your time to refuse such a condition. Because in the first case, you can purchase CASCO insurance for your own car, and in the second, pay higher interest rates without receiving anything in return.