A bad credit rating can be viewed as a mountain to climb for those affected by it. Consumers may deem themselves in a position where they are unable to receive any finance from lenders. This is however, not true.
"The truth: even with the worst credit, even one day after bankruptcy, an individual with bad credit may still obtain a credit card, a car loan or a home mortgage loan" (Attorney M. Brenner 2008).
Consumers have finance available to them regardless of bad credit as long as they are able to qualify through other requirements. Through fulfilling these requirements, opportunities of car loans or car credit will be made available.
Collateral can be a huge deciding factor when lenders are considering applications. Collateral, normally based upon fixed assets such as property, can be secured by the finance company. The collateral is used, as a source of payment, if a consumer does not make repayments of the full amount within an agreed time.
"This does not mean that credit or income requirements will be overlooked by the mere fact of applying for a secured bad credit loan instead of an unsecured loan. However, it is true that you can boost your chances by doing so" (Witts 2008).
Unsecured loans are still available for consumers with bad credit. These loans will be subject to higher interest rates and lower loan amounts but are still a viable option for those with bad credit. Those with bad credit can use co-signatories or guarantors in order to secure loans such as car credit.
"This will greatly reduce the risk and thus, ease the requirements for approval" (Witts 2008).
Consumer's confidnece in spending has fallen, effecting large purchases.
"Research, conducted in February, is one of the first pieces of evidence that the public are changing their behaviour to take account of the economic slowdown. Of the factors slowing spending, the biggest, cited by 44 per cent of people, was the rise in the cost of day-to-day living. One in six said they had received some big household bills; had seen their income plunge for another reason; or just felt they should be more careful in their spending". (Hickman 2008).
Cars can be an expensive one off payment. The current economic climate means that consumers are less confident in their disposable income spending. Therefore the option of spreading that payment over a period of time in manageable monthly sums is more appealing to consumers.
Recent surveys from the RAC have indicated that a sizeable proportion of UK drivers are searching in order to reduce the size of their car. Consumers view the need for a smaller car for two reasons. 1; Cost and 2; maximising their car credit.
Companies such as creditplus.co.uk are specialists in finding consumers potential finance opportunities. They will sort through the major lenders and find the best finance deal available for specific consumers circumstances.
The use of loan calculators and other financial assistance tools provide consumers with an easy way to check if how much monthly payments would be and for how long these repayments would need to be made. However, this would all be dependant on the outcome credit checks carried out.
References
Article Sphere. 2008. Bad credit doesn't have to be an obstacle. [Online] (Updated on 06 October 2008). Available at: http://www.articlesphere.com/Article/Bad-Credit-Doesn-t-Have-To-Be-An-Obstacle/158438 [Accessed 06 October 2008].
Debt workout. 2001. Introduction to Loan Options For Bad Credit Borrowers. [Online] (Updated on 01 April 2001). Available at: http://www.debtworkout.com/bad_credit/loan_help.html [Accessed 06 October 2008].
The Independent. 2008. Now the credit crunch is hitting home. [Online] (updated 16 April 2008). Available at: http://www.independent.co.uk/money/invest-save/now-the-credit-crunch-is-hitting-home-809603.html [Accessed 06 October 2008].
