Can you get car finance with a default?

Roman Danaev

26 July 2021

When looking for a lender to support you as you buy a new car, you may be worried about your financial history. Having defaults might have left a mark in your credit report that stands out to lenders. It might be something creditors ask about or weigh when considering your car finance application. However, it still means you can apply for car finance with defaults on your file, your approval chances are just a little different.

It may be tough to get finance without a great credit score, but it’s not impossible. In fact, there are special bad credit car finance options available to you. There are lenders who will consider you even if you have overdue payments on your record.

What is a default?

Having a default means you missed (or defaulted on) payments and received a notice that is now reflected on your credit file. As the information on your credit report is tied to your ultimate credit score, it may go down some points. Your default notice (or notice of default) is usually issued after you missed payments for at least three to six months and indicates when you need to have the payments cleared.

What to do after a missed payment?

Many of us might miss a payment or two, especially when we’re short on cash. During one of those moments, you might find yourself needing some finance to get a car. There are plenty of lenders sympathetic to your financial situation who can help, definitely some who specialize in car finance for people with default.

You can still greatly increase your chances of getting approved with a default by following these steps.

1. Create a correction notice

A correction notice is a short statement, usually not more than 200 words, where you explain how and why you missed some of your payments. The notice is an opportunity to describe the situation in your own words. Once it’s ready, you can add it to your online credit file. Here, lenders can understand the financial state you’re in, and it might help them approve your car finance application quicker.

2. Contact your debt’s lender

As soon as you’ve missed a payment, contact the lender that your debt is assigned to. While you may have consequences for missing the payment, your initiative and communication can have a positive impact on any future attempts to get credit.

While in contact with them, you can make a plan for the next payments. It’s a good idea to pay it all at once when possible or set up a plan to pay in monthly installments. Finance companies are thrilled to see when debts are paid in full or in small, recurrent increments. Making an effort to reduce your debt, no matter how small your monthly contribution is, makes you a more likely potential customer as it shows your willingness to repay your debts.

3. Learn your credit rating

You can stay on top of how lenders see you by knowing your credit score. If you have concerns about your credit file from past financial behavior, take a quick look at it. Checking your score is the first step to improving it. Knowing your score and credit history also helps you estimate the chances of creditors accepting your finance application, so you don’t waste your time with lenders out of your range.

4. Increase your credit score

Your best chance of getting car finance with default on your record is by improving your credit rating. Diving into your history and understanding what helped or decreased your credit score lets you learn how to grow your rating. Simple actions like using a credit card often for small purchases and then paying the balance off immediately can help immensely.

Having a competitive score doesn’t just mean getting more finance – it can also have a crucial effect on the interest rates you receive. Bettering your credit rating can mean securing a better car finance deal.

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