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Taking out car finance when you’re already in debt

If you’re already in debt then taking out more credit might concern you. Your initial thoughts might be how a car finance agreement will affect your situation on top of what you already owe. You might also be anxious that further borrowing could harm your credit rating even more.

Your credit rating

Simply taking out more credit shouldn’t have an impact on your credit score. Provided you make payments on time and at the correct amount, this can have a positive effect on your credit rating.

Your car finance application

We work with a lender who doesn’t base their finance decisions solely on your credit score. Instead, the lender takes affordability into account along with your personal circumstances. Your best chance at getting approved for bad credit car finance is if you can show evidence of managing your finances well now. This can mean that even if you have poor credit or have debts to pay, you may still be eligible for car finance as long as you can afford the monthly payments.

Car finance in a debt plan

If you’re in a DMP (Debt Management Plan) or IVA (Individual Voluntary Arrangement) then you might have struggled to get car finance elsewhere. This is because lenders won’t want to risk lending to you if you have a history of missed payments.

Unlike many other car finance providers, we work with a lender who understands that if you’re in a debt plan then you’re addressing your financial problems. The lender will consider your debt plan payments before making a decision on your car finance application.

Things you can do right now to help

Here are some of the things you can do right now on the path to reducing your debt and improving your credit score. These can be especially invaluable if your debt is preventing you from getting finance.

1. Check your credit report

If you haven’t already, checking your credit report will give you a clear view of your current financial situation. You will be able to gain insight into what has affected your credit score as well giving you a better idea of what interest rates you will be eligible for.

You will also be able to check the report for any errors that might be affecting your score. Here you can find more information on how to fix your credit report if you need to.

2. Know exactly how much debt you are in

Many people don’t know exactly how much debt they are in. This is not only extremely worrying but it can make repaying your debt very difficult. The best way to calculate your debt is by making a list of everything you owe and who you owe it to.

3. Prioritise your debts

When you know how much you owe you can work out which order you need to pay off your debts in. Making a payment plan can help you to work out which debts you should aim to pay off first. If you’re unsure, here’s a useful article on how you should prioritise the money you owe.

4. Set payment reminders

Late payments can be one of the top contributors to a poor credit rating. Some banks offer payment reminders via text or email to make sure you don’t miss any important payments. If you know the dates that these need to be made each month then you could also set your own alerts before payments are due.

5. Be disciplined!

Be careful what credit you take out going forward and only do so if it’s absolutely necessary. The last thing you will want is to end up with more debt to your name.

Need more help?

If you’re currently in debt but in need of a car then we can help you work out an affordable car finance agreement. We can also suggest what cars might be most appropriate for your situation.

If you’re in a situation where you need help with managing your debts then you shouldn’t delay in getting advice. The best thing to do in these circumstances is to contact a debt help organisation who will be able to talk through this with you and give you the right guidance.

This website is operated by Premium Plan Limited. Red Potato is a trading name of Premium Plan Limited, which is registered in England with Company No 05977118. Registered office: Kempton House, Kempton Way, PO Box 9562, Grantham, Lincolnshire, NG31 0EA. Premium Plan Limited is authorised and regulated by the Financial Conduct Authority (FRN: 742272). The Red Potato name and logo are trademarks of Totemic Limited. Premium Plan Limited is a member of the Finance & Leasing Association (FLA).