Car Finance with Defaults
Sometimes, when finances get tough, it can be hard to stay on top of your payments, and this can lead to something like a Default.
Having such a mark on your credit file will certainly make the likes of obtaining car finance harder, but it's not impossible.
What is a default?
A default is when a person fails to make the required payments on a debt - this can refer to either the principal repayments or the interest.
When a person fails to pay, a "notice of default" is issued, while an account default will occur if you break the terms of an agreement.
This happens when you do not make the required payments on time, though conditions can vary as to when this would happen.
Default Examples
- A home owner would default if they fail to make monthly mortgage repayments for a period of time.
- A credit card holder would default if they fail to make minimum required payments by a due date.
A default can happen on secured debts that require collateral, like a house or a car, and unsecured debts like credit cards.
Additionally, defaults can lead to legal claims, which will limit your access to credit in the future.
How long does a default stay on your credit file?
A default notice will not impact your credit file - but an account default will.
If an account default is recorded on your credit file, it will remain there for up to six years, after which it will be removed.
Having a default will negatively affect your credit rating and your ability to obtain new lines of credit, such as car finance.
Creditors view defaults as a risk, as they indicate a lower likelihood of repayment.
Can I get car finance with a default?
It is possible to get car finance with a default on your credit file - however, the more you have, the less likely you are to acquire car finance.
At Stoneacre, we have a panel of lenders who specialise in dealing with bad credit car finance factors such as defaults.
You can check your eligibility through our soft search finance check and, if you're initially deemed you're eligible, we can continue to a full application.
Car Finance with Paid Defaults v Unpaid Defaults
Applying for car finance with default fully paid up puts you in a stronger position for securing car credit, as it demonstrates that you've settled your debts.
Though a default stays on your credit file for six years from the date it was issued, having it paid off will place you in much better stead to get accepted for finance.
With an unpaid default, however, car finance can be more difficult to obtain.
While, our in-house finance team will take into account your personal circumstances when considering your application, it is important to keep in mind that if you apply for car finance with unpaid defaults, you are less likely to be approved.
It is also important to note that getting car finance with a default can lead to higher rates of interest due to the increased risk involved - larger deposits can also be sometimes required.
Keeping this in mind, you must aim to clear your debts as soon as possible - if you ignore your default notice, then you could end up with a County Court Judgement (CCJ).
What happens if I default on car finance?
As car finance is a secured debt, a finance company can repossess your car if you miss payments and default.
In addition, if you've paid less than a third of your agreement and you default on your car finance, your lender can repossess your car without going to court.