Best Ways To Finance A Car With Bad Credit: Your Comprehensive Guide

Buying a car with bad credit can be tricky. Your credit score affects loan rates and options, so it can be harder to find a good deal. But don’t worry, a poor credit score isn’t the end of the road for car finance!

This guide is your roadmap to financing a car with awful credit. We’ll break down the challenges, explore your options, and equip you with the knowledge to find the best route to your new car.

Demystifying Bad Credit Car Loans: Understanding Your Options

Before diving into the world of car finance, it is best to first understand what bad credit actually constitutes and how it affects your ability to secure a car loan.

What is Bad Credit?

Bad credit simply means your credit score is lower than ideal. Credit scores are numbers (ranging from 0 to 999) that reflect your past borrowing habits. A low score might suggest missed payments or other financial bumps in the road. This can make lenders hesitant to offer loans, or they might charge higher interest rates to compensate for the risk.

How does Credit Score Affect Loan Approvals

There are many factors that go into your credit score, like your payment history, how much credit you’re using, and how long you’ve had credit accounts. Lenders use your score to decide if you’re likely to repay a loan on time.

The higher your score, the better the loan terms you’ll typically qualify for, like lower interest rates or larger loan amounts. Lower scores might mean higher interest rates or even loan rejections.

Credit Score Ranges and Car Loans

The UK credit scoring system differs across credit reference agencies (CRAs), such as Equifax or Experian. Each CRA uses its own scoring system, typically ranging from 0 to 999. A higher score indicates a better credit history.

There is no universal benchmark range for credit scores in the UK. As a result, the specific ranges for good, fair, and poor credit will vary slightly depending on the CRA and the lender’s criteria.

Don’t be discouraged if your credit score isn’t perfect. While a stronger score generally translates to better rates, specialised bad credit lenders also consider other factors like income, employment status, and your history of managing credit.

Are you ready to explore car finance options? Apply for a free, no-obligation quote with Bad Credit Motor Finance and let our team of specialists find a deal tailored to your financial situation.

Lender: Traditional Lenders vs. Specialised Bad Credit Lenders

There is no one-size-fits-all solution when it comes to bad credit car finance. The two main ways to finance a car with bad credit: traditional lenders and specialised bad credit lenders. Make sure to review their respective pros and cons before making a decision.

Traditional Lenders

Traditional lenders for car finance include banks and credit unions, who offer loans with fixed terms and interest rates.


  • Good Rates: Typically offer lower interest rates for borrowers with good credit history.
  • Trusted Name: Banks and credit unions often have a long-standing reputation and can feel more secure when applying.
  • Potentially Favourable Terms: Depending on your credit, you might qualify for longer loan terms or lower fees.


  • Rejections Likely: The biggest drawback of traditional lenders for individuals with bad credit is the likelihood that you might get rejected outright, or at the very least, offered worse loan terms.
  • Strict Requirements: Banks and credit unions can be picky about credit scores, making it tough to qualify with bad credit.
  • Slow Process: Getting approved through traditional lenders can take longer than with other options.

Specialised Bad Credit Lenders

Specialised bad credit lenders for car finance cater to individuals with lower credit scores, offering more flexible loan terms and approval criteria than traditional lenders.


  • Higher Approval Rates: These lenders are used to working with borrowers who have less-than-perfect credit so are typically more capable of finding a tailored financial package.
  • Faster Approvals: They often have quicker application processes, getting you the money and on the road faster.
  • Flexible Options: Bad credit lenders tend to be more flexible in the loan terms offered to those with bad credit.


  • Higher Interest Rates: Expect higher rates to offset the risk they take on with bad credit borrowers.
  • Beware Predatory Lenders: Some lenders might have unfair terms, so be cautious when choosing one.
  • Rejection Still Possible: These lenders cannot 100% guarantee car finance to certain individuals.

Differences in Loan Terms, Interest Rates, and Eligibility Criteria

AspectTraditional LendersSpecialised Bad Credit Lenders
Loan TermsLonger repayment periods availableTerms may range from 36 to 72 months or moreShorter repayment periodsTerms typically range from 12 to 48 monthsMore flexible terms tailored to bad credit
Interest RatesGenerally lower interest rates for borrowers with better credit scoresRates can vary widely based on creditworthinessHigher interest rates to offset increased riskRates often higher, reflecting risk associated with bad credit
Eligibility CriteriaPriority on high credit scoresIncome stability and employment history are crucialDetailed credit and financial background checksFocus on recent financial behaviourWilling to overlook poor credit scores for recent positive behaviourMore lenient, considering ability to repay over credit history

Unsure where to start? Let our experts find you the best bad credit car loan options. Apply for a free quote that has no impact on your credit!

Finance Option: Hire Purchase vs. Personal Contract Purchase

Figuring out how to finance your next car can feel overwhelming, especially with all the different options out there. Hire Purchase (HP) and Personal Contract Purchase (PCP) are two popular choices, but they cater to different needs. 

Not sure which is right for you? Don’t worry, we’ve broken it down for you.

Hire Purchase (HP)

Hire Purchase is ideal for drivers who want to hold onto their car for the long haul. Once the final payment is made, you own the car outright. This is a good fit for those who value long-term ownership and don’t plan on trading in their car every few years.

HP also offers simplicity. There’s a down payment upfront, followed by fixed monthly payments until everything is paid off. No surprises, no hidden fees. This straightforward approach is a plus for those who prefer a clear and predictable payment structure.

However, it also comes with drawbacks to consider. Compared to PCP, HP payments tend to be higher because you’re financing the entire cost of the car, not just its depreciation. Moreover, owning the car outright means you won’t have an end-of-term trade option and you are responsible for any depreciation in value when it comes time to sell.

Who should consider HP:

  • People who want to fully own their car.
  • Those who prefer the simplicity of fixed monthly payments without mileage limits.
  • Drivers who cover high mileage.
  • Folks happy with long-term car ownership and less interested in frequent upgrades.

Personal Contract Purchase (PCP)

Personal Contract Purchase is a smart option for drivers who prioritise lower monthly payments. Since you’re only paying for the car’s depreciation (the decrease in value over time), not the entire cost, PCP keeps those payments lower.

This option is also a good fit for those who crave flexibility. At the end of the PCP term, you have choices: return the car, buy it outright with a one-time payment, or trade it in for a newer model. This is perfect if you like to switch cars frequently, as PCP will allow you the freedom to upgrade to a new car with all the latest features every few years

However, it is worth bearing in mind that PCP comes with mileage limits in most agreements, so it works best for drivers who know how much they drive and can stay within those limits. Furthermore, there is no guaranteed ownership at the end of the term, typically leaving you with a final lump sum payment (balloon payment) to own the car outright.

Who should consider PCP:

  • People who want flexibility in owning a car.
  • Those who prefer lower monthly payments.
  • Drivers with predictable, low annual mileage.
  • Folks who enjoy driving new or nearly new cars regularly.

Final Words

Don’t let bad credit stall your dreams. Explore your options, understand the terms, and maybe even take steps to improve your credit score in the long run. With some effort and the right support, you can absolutely be cruising in your new car.

Ready to get started? Reach out to Bad Credit Motor Finance today – let us turn your car ownership dreams into reality!