Many loan companies and used car dealers in Auckland have been known to prey on people with a bad credit score, because these people are in a difficult position. They’re in need of a new car to get around, get to a job, or transport their family, but previous financial circumstances have landed them in a bracket that makes the typical loan company reluctant to help them. Unfortunately, this can make them desperate enough to accept unreasonably high-interest rates or predatory loan terms.
The truth is, a bad credit score does not have to deprive you of the power in a negotiation, and you can still get a reliable car loan if you play your cards right. Let’s explore some of these options.
What is a Credit Score?
A credit score is a number that indicates how likely you are to repay borrowed money on time. In New Zealand, the number lies somewhere between 0 and 1000. The higher that number is, the better your credit score. High credit scores indicate to loan companies that you make reliable repayments, whereas a poor credit score can indicate that you’ve had some issues with that in the past.
Here’s a breakdown of credit score brackets:
- Amazing: 700 and over
- Average: 500 to 700
- Below Average: 300 to 500
- Poor: 1 to 300
In a lender’s eyes, being in the “Poor” range can make you a risky choice for a loan due to your credit history. You may have been late on credit card payments, had a high number of inquiries into your credit score, or even filed for bankruptcy in the past.
Regardless of all these, buying a car with a loan is not impossible with a bad credit score as long as you approach the situation with caution and a good head on your shoulders. Here’s how to do it.
Tips for Getting a Car Loan with Bad Credit
There are three major tips for getting a reliable car loan with bad credit. The overarching theme here is to be careful; companies supplying car loans to Auckland residents with a bad credit score can often be predatory, so you need to choose wisely.
Number One: Know Your Credit Score
The key to heading into any situation is to know what you’re working with. Take the time to learn your credit scare, and from there you can find a loan company or dealership that works for you with the full knowledge of what you deserve.
Knowing your credit score will prevent loan companies from manipulating you into unreasonable interest rates or loan terms. If you know what your credit score is worth, and you look out for manipulations in meetings with loan providers, you will notice when they attempt to downplay a risky agreement.
Number Two: Do Your Research
Whether financing through a car dealership, with your bank, or with a loan company, always research what terms you should expect beforehand. If you head in with a firm understanding of what everything in a loan contract means, you are much less likely to fall prey to the sometimes-ambiguous language some companies use. Remove yourself from a position of vulnerability with this practice; the cards are in your hands.
In addition, you can shop around to find the right loan company or dealership. Look around for companies that will work with you in spite of bad credit, check customer reviews religiously, and look for lawsuits or newsworthy issues the company has had.
Number Three: Finalise All Terms Before You Sign Anything
Before your pen touches that signature line, make sure you have read through the entire contract. Some companies try to put you on the spot and make you sign immediately, without giving you the chance to read the contract in detail. Unfortunately, many people fall prey to this tactic! The need to hang onto what appears to be a good deal overrides caution, making them agree to unsavoury terms on the spot.
Be firm about taking the time to read the contract over—take it home if you have to. Check for any clauses that allow the lender to spontaneously adjust your interest rate, or anything that states they can claim the entire loan back without sufficient notice (this is where your previous research will come in handy).
If you do notice clauses such as these, they are big red flags. Get them taken out of the contract before you sign and replaced with new clauses, or choose a different lender altogether.
No matter what, make sure you think in the long term! You can find a loan that will help you buy a car without placing yourself into financial ruin, so do your research.
Get reliable car financing with MotorCo, Auckland’s favourite used car dealer.
We are 100 per cent committed to responsible lending, and will always work with our customers to make sure they are making an informed decision. If you are having difficulty finding car finance in Auckland with your current credit score, give us a call and we will work to find a plan that caters to your circumstances. Get in touch with our friendly team today!