How car finance works through Autedia
What is a Default?
A Default happens when a lender closes your account because you have missed payments. A defaulted account usually means you have failed to make numerous monthly payments, and the creditor has been unsuccessful in arranging to bring your accounts up to date.
Missed payments can often follow a late payment or two. Between 3 and 6 months of failed monthly payments will trigger a Default Notice.
Can I get car finance with bad credit history, including a default? Read on to understand how best to apply for car finance with a default.
Why should you choose Autedia for your car finance?
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|Total cost of credit||2,125.46|
Rates from 8.9% APR: the exact rate you will be offered will be based on your circumstances, subject to status.
Representative example: borrowing £6,500 over 5 years with a representative APR of 29.9%, an annual interest rate of 29.9% (Fixed) and a deposit of £0.00, the amount payable would be £196.34 per month, with a total cost of credit of £5,280.14 and a total amount payable of £11,780.14.
What counts as a Missed Payment on my Credit Report?
A default occurs when you miss payments
Defaults don’t just happen; you’ll have numerous chances to stop one from being issued:
- If you don’t pay an instalment within 30 days of the due date but pay after that, you’ll likely get a Late payment mark on your credit report.
- Missing the payment altogether becomes a Missed Payment mark on your credit file.
- Several missed payments over time can cause the lender to issue a Default on your account.
Can you get car finance with a Default or Missed Payment?
If you want to buy a car on finance, you might be concerned about your credit history. Many people have difficulties with payments on a loan. If your question is, ‘can I get car finance with a default’ the short answer is Yes.
Some lenders will offer bad credit car finance with late or missed payments. Most of us, at some time, will have missed a payment date or suffered cash flow issues, but we still need finance to buy a car.
Of course, getting car finance with a default is more challenging than for someone with an excellent credit record. However, obtaining car finance with a default isn’t impossible.
What is a Default Notice?
The Consumer Credit Act 1974 requires a Default Notice to be sent by your creditor stating the payments you failed to make with a date you must clear the debt (usually at least two weeks).
If you make the payment, your Account will carry on as usual.
However, failure to meet these requirements and your Account will be in Default.
An Account defaults when you break the terms of the credit agreement. Your lender concludes they can’t get you to pay and cancels your agreement. A debt can only default once, but your creditor can take further action to collect the debt after this happens.
What types of accounts can be defaulted?
- Bank overdraft.
- Credit card.
- Mobile phone.
- Car Finance
Never ignore a Default Notice!
Suppose you have accumulated numerous missed payments on one of your accounts. You’ll likely receive a Default Notice from the creditor! Don’t ignore it. If you avoid a default notice, your financial situation can worsen if a County Court Judgement arrives through the post.
You must contact your lender as soon as you receive a Default Notice
Communication is crucial when you want to stop something like a financial penalty from happening to you. Contact your creditor and acknowledge receipt of the default notice. If you can pay in full, do so.
Suppose you cannot immediately pay. Agree with your lender on the way to catch up with your payments. They will always prefer a positive approach rather than making an account Default.
However, if you can’t get an arrangement with your creditor – they will apply a Default to your account. A Default on your file will affect your credit.
However, suppose you receive a Default on your credit file and still want to apply for further credit. You could complete a Notice of Correction that may swing an application in your favour.
What is a Notice of Correction?
A Notice of Correction won’t improve your credit score. Still, it may enhance your chance of getting further credit.
If you apply for credit and a lender searches your file and sees the notice, it can make them aware of why you might have a low credit score. Which may or may not help with your application.
The notice allows you to write an explanation (a maximum of 200 words) of how your Default or defaults occurred. Lenders can use this to understand your circumstances when reviewing your finance application.
Can paying off my Default improve my chance of getting Car Finance?
Once you have a default entry on your credit report, it remains for six years unless you can prove the creditor made a mistake.
While paying off what you owe on a default account will not remove it from your credit history, the report will show it as Satisfied. Having cleared the Default, some lenders will look more favourably at applications for car finance with a default.
How long does a Default remain on my Credit Report?
A default is on your credit file for six years – even if you pay off your debt. Avoiding getting a default is crucial. Getting car finance with a Default is more challenging than If you do have a default. You’ll have a bad credit rating and can expect a higher APR.
What happens if you get a Default Notice on a Car Finance Agreement?
You’ll likely be expected to pay the total amount owing rather than paying the previously agreed monthly payments. The creditor may be agreeable to instalments but does not have to accept.
The creditor will likely take additional action when your account defaults:
- Using a debt collection agency.
- Take out a CCJ against you.
- Apply to a Court to retrieve the vehicle if the debt was hire purchase which includes HP and PCP.
If the Consumer Credit Act regulates the debt, your creditor can’t take any action unless the account defaults.
If you have a defaulted account you’ll need to pay the full outstanding amount to receive a satisfied on your credit report.