Guaranteed Car Finance – Are They Safe?

Buying a car seems like a nightmare to those who have a poor credit history. Financing your car at lower interest rates requires a good credit report. Unfortunately, many apply with an abysmal credit rating. A few lenders might be willing to accept your application, but interest rates will be quite high. However, most of the lenders will most likely turn down your application.

In this case, you turn to lenders who let you finance your car without a credit check. Due to the proliferation in the number of subprime borrowers, a few lenders advertise offering 100% guaranteed car finance deals.

You might be tempted to apply for these deals as they do not carry paperwork and do not make a decision based on your credit score. Although these loans seem to be very affordable, you should avoid taking out guaranteed car finance.

Do 100% guaranteed car finance exist?

Though a few lenders guarantee the car finance, the fact is that 100% car finance deals do not exist at all. These kinds of loans can be skulduggery. Such kinds of loans are offered to trap credulous borrowers into the most expensive deals. Once you get trapped in them, you will end up paying a lot more money than the actual cost of the car.

100% guaranteed car finance deals are just a trap. They do not come under ethical lending practices. The regulatory authorities have warned borrowers against such kinds of scams. No complaints are addressed when you use these kinds of loans.

An ethical lender will not use the “guaranteed” word to advertise their loans. Under no circumstances can a lender give a guarantee to borrowers about the approval for a car loan.

Here are the things that a lender must look at before giving the nod:

1.  Your credit score

Even if you have already told them that your credit report is not up to snuff, they will check your credit report. It is a lender’s call whether they will see the report from Experian or Equifax. The credit rating may vary; however, the difference will not be significant that one report shows you an advantage and the other does not.

Your credit rating is a must that a lender will check to figure out your credibility. Your credit score determines how loyal you have been to your previous payments. It proves your loyalty if you show that you stuck to all payments. Of course, you will qualify for a car fiancé deal at the best interest rates.

Note that your lender does not want just to see whether or not you stuck to previous payments. A lender wants to see your overall financial situation, and they cannot just get to know from your income sources.

They would want to see whether you were on default constantly or you missed a few payments. It is likely that you fell behind on payments because of being caught up with emergencies or unavoidable circumstances. These scenarios do not affect your credibility even though your credit points are low. You will still get a chance to avail of lower interest rates.

Other factors that a lender wants to see are your credit utilisation ratio, debt mix, and debt-to-income ratio. If these factors are not favourable, you might not be able to get the green light despite paying all previous payments on time.

2.  Your current income sources

Your income sources will also determine the interest rates you will be imposed. You should have a great income source. The stronger your repaying capacity, the more sound borrowers you will be considered. This can even offset the impact of your poor credit score.

Make sure you have all the documents to prove your income. Your lender might not want to know the backup in case you lose your job. You should think about it. In case of poor financial condition, you cannot abdicate responsibility.

How to spot a car finance deal is a scam

Whether you are looking for a loan from a direct lender or a car dealer, you should check that they are genuine. Bear in mind that it is your responsibility to check the authenticity of a lender or a dealer. If you just take on money, you will end up with an extortionate debt.

Here are the tricks to see through the advertising lies of a lender:

• Suppose they pretend as if their car loan deals are 100% guaranteed. The fact is that 100% guaranteed loans from a direct lender do not exist at all. Just ignore if you run into such deals.
• A lender has stated that no hard credit checks will be run. The decision will be solely made on your income sources. This is false, as no lender can sign off without running hard inquiries. Even lenders running only soft credit checks should be avoided. They may offer you exorbitant loan deals.
• A lender says that less formality is involved, and they do not get deeper into your income sources and spending details.
• The lender is not registered with the FCA. Beware of lenders that are selling loan products without having a registration. Such lenders might be unethical and fraudulent.
• Check for their address on their website. Find out if the address is genuine.
• Check reviews to see if people have condemned the loan deals a lender offers.

The bottom line

There is no such thing as guaranteed car finance. No lender can give a guarantee without checking your credit score and income sources. An affordability check is a must. You can get a pre-qualifying letter without a hard credit check run, but the actual rates are determined only after a credit check.

You should borrow money only from a registered lender. If your credit rating is holding you back from getting the best interest rates, you should do up your credit rating first.