Getting Car Finance with a Bad Credit Rating: Your Options Explained
Published 29th of August 2017·Updated 19 April 2026
Reviewed by: Reviewed for accuracy April 2026
Getting car finance with a bad credit rating is possible in the UK, but you will pay more for it. Specialist lenders exist who focus on bad-credit applicants, and some mainstream dealerships also offer finance to people with a poor credit history. Expect higher interest rates and a requirement for a larger deposit, typically 15 to 20 per cent of the car's value.
Short Summary
Lenders check your credit history when you apply for car finance. A poor score means you are seen as a higher risk, which usually results in a higher interest rate or a declined application from mainstream banks.
Specialist car finance lenders are often more flexible than high-street banks. They assess your full financial picture, not just your credit score, and many will lend if you can put down a reasonable deposit.
A guarantor arrangement is another route. A friend or family member with good credit agrees to cover repayments if you cannot. This reduces the lender's risk and can unlock better rates.
If you are declined, do not apply to multiple lenders in quick succession. Each hard credit search leaves a mark on your file and repeated applications in a short period can push your score lower.
Why does a bad credit score affect car finance applications?
When you apply for car finance, the lender runs a credit check to assess how reliably you have repaid debts in the past. Missed payments, defaults, County Court Judgments (CCJs), or a very limited credit history all reduce your score with the three main credit reference agencies: Experian, Equifax and TransUnion.
A lower score signals higher risk to the lender. To offset that risk, they either charge a higher interest rate, require a larger deposit, or decline the application altogether. High-street banks including Barclays, NatWest and Lloyds tend to have the strictest criteria.
Which lenders offer car finance for bad credit?
Specialist car finance brokers such as Moneybarn, Zuto and Evolution Funding are built around bad-credit applicants. They work with a panel of lenders and match your profile to the most suitable one. The trade-off is that APR rates can be significantly higher than mainstream finance, sometimes well above 20 per cent, so calculate the total cost of borrowing before signing anything.
Dealership finance (hire purchase or personal contract purchase arranged through the forecourt) is also worth considering. Dealers earn commission from the finance, so they are motivated to find you a deal, and some have relationships with lenders who accept a wider range of credit profiles.
| Finance route | Typical flexibility | Typical APR range | Deposit usually required |
|---|---|---|---|
| High-street bank personal loan | Low | 6-15% | No |
| Specialist bad-credit lender | High | 15-40%+ | Yes (10-20%) |
| Dealership hire purchase | Medium | 8-25% | Yes (10%) |
| Guarantor loan | Medium | 10-20% | Sometimes |
| Credit union loan | Medium | Capped at 42.6% APR | No |
What is a guarantor car loan and is it worth it?
A guarantor car loan involves a third party, usually a parent, sibling or close friend, who agrees to make your repayments if you miss them. The lender treats the guarantor's creditworthiness as security, which can unlock finance you would otherwise be declined for.
This arrangement works well if your bad credit is simply the result of a thin credit file rather than genuine financial mismanagement. Be honest with your guarantor about the risks. If you miss payments, they are legally obliged to cover them, and that can cause lasting damage to your relationship as well as their credit score.
How much deposit do I need for bad credit car finance?
Most specialist lenders expect a deposit of between 10 and 20 per cent of the vehicle's value. A larger deposit reduces the amount the lender needs to fund, which lowers their risk. Some lenders will accept less if other parts of your application are strong, such as stable employment and a higher income.
A deposit of 20 per cent or more gives you the best chance of approval and can bring the interest rate down meaningfully. If you cannot raise a deposit, a guarantor arrangement may be the only realistic route.
How can I improve my chances of being approved?
Check your credit report before applying. You can view your report free of charge through Experian, Equifax or TransUnion's own services, or use free platforms such as ClearScore (Equifax data) or Credit Karma (TransUnion data). Dispute any errors you find, as mistakes are more common than people expect.
Reduce outstanding debt where you can and make sure you are registered on the electoral roll at your current address. Lenders use the electoral roll to verify identity and address history. A stable employment record also helps, as does avoiding any new credit applications in the three months before you apply for car finance.
Should I use a broker or go direct to a lender?
A broker searches multiple lenders with a single soft search, which does not affect your credit score. This gives you a realistic picture of your options before a formal application. Going direct to individual lenders means each application may trigger a hard search; if you are declined, that mark stays on your file.
For bad-credit car finance, using a specialist broker is generally the more sensible starting point. Confirm with the broker whether their initial eligibility check is a soft or hard search before you proceed.
Frequently Asked Questions
Can I get car finance with a CCJ?
Yes, some specialist lenders will consider applications from people with County Court Judgments on their file, particularly if the CCJ is more than a year old and has been satisfied (paid off). You will typically need a larger deposit and should expect a higher interest rate. A broker who specialises in bad-credit finance is your best starting point.
Will applying for car finance hurt my credit score?
A hard credit search, which most formal finance applications trigger, does leave a mark on your file and can temporarily lower your score. Using a broker who runs an initial soft search first means you can check your eligibility without any impact. Multiple hard searches in a short period look worse than a single one.
Is hire purchase easier to get with bad credit than a personal loan?
Generally, yes. Hire purchase is secured against the vehicle, which means the lender can repossess the car if you do not pay. This security makes lenders more willing to approve applications from people with a weaker credit history compared to an unsecured personal loan.
What interest rate should I expect with bad credit car finance?
Rates vary widely depending on the lender and your specific credit profile. A mainstream bank might offer 6 to 15 per cent APR to someone with good credit. With a poor credit history, specialist lenders often charge between 20 and 40 per cent APR or higher. Always calculate the total amount repayable, not just the monthly payment, before agreeing to any deal.
Can I get car finance with no credit history at all?
Yes, though it can be as difficult as having bad credit. Lenders have little evidence to base a decision on. Strategies that help include using a guarantor, putting down a larger deposit, or building a thin credit file first through a credit-builder credit card or a mobile phone contract before applying for car finance.
What happens if I miss a payment on my car finance?
Missing a payment will be reported to the credit reference agencies, which will lower your score. If you miss multiple payments, the lender can apply to repossess the vehicle. Contact your lender immediately if you think you will struggle to pay. Many lenders have hardship teams and can arrange a payment holiday or a restructured plan before the situation escalates. The Money Advice Service offers free guidance on managing debt if you need independent support.