Car finance with a default
If you have a default on your credit file, you might be worried that it will stop you from getting car finance. But try not to worry, we may be able to help.
At Car Finance 247, we work with lenders who specialise in helping people with bad credit, including those with defaults. Although a default does show lenders that you’ve struggled with payments in the past, it might not mean that getting car finance is impossible.
While you may have fewer options or need to pay higher interest rates, we will try and help you find a deal that works for you. Credit is subject to status.
What is a default?
A default is what can happen when you don’t repay back any type of credit you’ve borrowed, whether that’s car finance, mortgages, loans, credit cards or phone contracts.
If you miss payments on a loan, the lender will send you a default notice as a warning, generally after three to six months. The notice will explain which payments you’ve missed, the deadline to make the payments, and the consequences of not doing so by that date.
If you’re unable to clear the required payments in the time specified, your account will default. The default will then stay on your credit file for around six years and may make it more difficult to get approved for credit in the future, because it lowers your credit score and could make future lenders believe you’re more of a risk to lend to.
Paid vs unpaid defaults:
Whether your defaults are paid or unpaid could make a difference when it comes to getting a loan. Here’s the difference:
● Paid defaults: These are defaults that have been settled in full. They still appear on your credit file for six years, but the impact of these may be less than defaults still outstanding.
● Unpaid defaults: These are still outstanding and can have a bigger impact on your chances of being approved for car finance. Some lenders may see them as a sign that you're still struggling to manage your debts and may make them less likely to lend to you.
Paid or unpaid, a default can make it difficult to get car finance. But it doesn’t automatically mean you’ll be refused. Let’s look into it in more detail.
Can I get car finance with a default?
Yes, you may still be able to get car finance with a default, but it will not be as straightforward as applying with a clean credit history. A default on your credit file can make it harder to get car finance because it shows lenders that you’ve missed payments in the past. This can mean fewer lenders are willing to offer you a loan, so your options may be more limited.
Additionally, if you are approved for car finance with a default, you might have to pay higher interest rates. This is because lenders might see you as a higher risk. You might also be asked to put down a bigger deposit to reduce the amount you borrow.
But, there are some lenders who may be able to help people with defaults, especially if you’ve been good with your money since the default. Here's some of the things lenders might look for when approving a car finance loan.
At Car Finance 247, we work with lenders who specialise in bad credit car finance, and may consider applications from people with defaults. They’re interested in your overall financial situation, not just your credit history. Credit is subject to status.
When you apply for car finance with a default, lenders may take several things into account, including:
● The age of the default (the older it is, the better your chances)
● Whether the default has been paid off or is still outstanding
● Your current employment and income level
If a temporary setback caused the default but you’re now in a more stable position, you may be more likely to secure finance. If the default is recent, lenders may be more cautious, but you could still find a lender willing to offer car finance. With our help, we’ll try and find an option for you, considering your individual circumstances and helping you navigate the process.
Tips for getting car finance with a default
So, can you get car finance with a default? Yes, you could – getting car finance with a default on your credit file can be challenging, but it’s not necessarily impossible. Here are some helpful tips to try and improve your chances of getting approved:
Review your credit file and make any fixes
● Check your credit report for any default errors
● Settle any outstanding defaults if you can
● Contact your lender if needed
Strengthen your financial position
● Offer a larger deposit (this can also help you get better loan terms)
● Review your income and outgoings regularly to set a realistic budget
● Have realistic expectations for your new vehicle
Demonstrate stability
● Have reliable employment records ready
● Show a stable address history of three or more years in the UK
● Register on the electoral roll
● Gather payslips and bank statements
Consider alternative finance routes
● Consider a guarantor who will make payments if you can’t
● Apply with a specialist lender who is more likely to approve your application based on your overall circumstances, not just your credit score
Apply strategically
● Avoid making multiple applications which conduct a hard credit search in a short space of time, as this can impact your credit score
● Wait as long as you can before applying to try and reduce the impact of a new default
Car finance with CCJs and defaults
A default and a County Court Judgment (CCJ) aren’t the same thing, but they’re both signs of missed payments and could affect your chances of getting car finance.
A CCJ is more severe than a default. It’s a court order that may be issued if you don’t repay the money you owe on your defaulted account. If you ignore it or don’t pay within 30 days, it’s recorded on your credit file for six years and could have a serious impact on your credit score.
If you need car finance with CCJs and defaults on your file, try not to lose hope. It’s important to know that there are lenders who specialise in working with people in similar situations. While having both a CCJ and a default can make it more difficult to secure finance, there could still be options available.
Lenders might want to know the details behind the CCJs and defaults, and they could ask about:
● When the default and CCJ were registered
● Whether they’ve been repaid or not
● How you’ve handled your finances since
Even if you have multiple defaults or a CCJ, it may be possible to secure a deal. The loan might come with higher interest rates, but we can try and help you find a lender that’s flexible and willing to work with your unique circumstances. Credit is subject to status.
What happens if I default on a car loan?
Missing several car finance payments can lead to a default being added to your credit file. But what actually happens when you default on a car loan?
What happens when you default on a car loan: The process
When you take out car finance, you agree to make regular payments. If you start missing them, here’s what may happen:
Late payment charges: After a missed payment, your lender might charge a late fee and get in touch to remind you.
You fall into arrears: If payments continue to be missed, the amount you owe grows, and you’ll fall into arrears.
Default notice issued: Once you're around 3–6 months behind, the lender may issue a default notice. This gives you at least 14 days to catch up or make any required payments before the account is closed.
Your account is defaulted: If you still don’t pay, the lender may record a default on your credit file and close your account.
Repossession or legal action: Depending on the type of agreement, the lender might take steps to repossess the car or regain the debt you owe through the courts, which could result in a CCJ.
A default has a big impact on your credit rating and stays on your credit file for six years, seriously impacting your chances of getting car finance or other loans in the future. That’s why it’s really important not to ignore the situation and to contact your lender as soon as possible.
Here’s what to do if you think you might be at risk of defaulting a current car finance agreement and the steps you should take.
What to do if you’re at risk of defaulting on car finance
If you're struggling to keep up with your car loan payments, it’s important to act quickly:
● Speak to your lender: Your lender might be able to help by pausing payments, reducing your monthly amount, or offering a temporary payment plan to make your payments more manageable.
● Seek debt advice: Charities like StepChange and National Debtline offer free, confidential advice and may help you work out a plan.
● Look into voluntary termination: If you've already paid off more than 50% of your car finance agreement, you might be able to voluntarily return the car, depending on your lender.
Remember, you do have options. Defaulting on car finance can feel overwhelming, but there is help available, and taking action early could make a big difference.
Don’t avoid the problem; the sooner you deal with missed payments, the more options you’re likely to have.
Conclusion
By following these tips, you could increase your chances of getting car finance, even if you have a default on your credit file and have been refused car finance elsewhere.
Whether you’re looking for car finance with defaults, car finance with an IVA, car finance with a DMP or car finance with a DRO, we’re here to guide you through the process. Credit is subject to status.
Get in touch with us today to start your application and find out what options are available to you. To see what kind of deal you could be eligible for, use our free car finance calculator.