Do you think that you are unable to get car finance because of your low credit score? You are not alone. Many South Africans are in the same situation. This blog will look at the various alternatives available to low credit scores car buyers, first time car buyers, as well as financial advisors responsible for providing value adding advice to their clients.
Understanding the Basics
Before we look at the alternatives, let’s take a moment to understand why a low credit score can make car financing a difficult task. In short, lenders consider borrowers with low credit scores as a high risk, which leads to either higher interest rates or an all-out refusal. But don’t worry—there are options available to help you get behind the wheel.
Alternative Car Financing Options
Here are your options for car finance for low credit score in South Africa.
1. In-House Financing
Because many South African car dealerships offer in-house financing, you may actually borrow money from the dealership rather than from a bank or credit union. Dealers might be more flexible about who’s eligible for a loan but expect interest rates to be higher.
2. Personal Loans
A personal loan would be a better approach if your poor credit is keeping you from getting a car loan. Lots of banks and online lenders offer personal loans on terms that are much less credit-sensitive than car loans. You may still pay a high interest rate, but that’s a reasonable option if you need quick finance.
3. Credit Unions
Some credit unions offer great service on a more personal level. Many are willing to work with people with low credit and often come up with terms that are better than traditional banks. Check with your local credit unions for their offerings.
4. Peer-to-Peer Lending
P2P lending platforms put you in direct touch with individual investors, who are often more willing to bend the terms of credit requirements and interest rates. Examples include RainFin and Lendico.
5. Rent-to-Own Programs
Rent-to-own car programs enable you to rent a car for the term and then buy it at the end. While it may have higher monthly payments, it’s sometimes easier to qualify for rent-to-own programs than for loans from conventional banks.
6. Secured Loans
Secured loans make use of collateral to lower the lender’s risk. If you have assets (such as property or savings), you might be able to use these to secure a loan, making you an enticing prospect for a lender, even with bad credit.
Tips for Improving Your Credit Score
While exploring these alternatives, you might also want to be working on your credit score. Here are a few quick tips:
- Pay Bills on Time, Always: One of the most important factors in your score is your willingness to pay bills on time.
- Lower Your Debt: Try to decrease the amounts you owe. The lower your balances, the better your credit score will be.
- Check your Credit Report: Check your credit report regularly for inaccuracies, and dispute any you find.
Concluding Thoughts
While it is more difficult to pursue car financing if your credit score is low, it isn’t impossible. There are alternative avenues for car financing that might help you explore and find what best suits your needs, and working on your credit could boost it and improve your options.
If you want to find the car payments on your next purchase, try swiftbanker.co.za car payment calculator to calculate your potential payments and to find the best car financing opportunities. Take your car financing into your own hands today.
