Can You Get a Car Loan If You Had Arrears on a Previous Loan?
Yes, but having arrears on a previous car loan can reduce your chances of approval. Lenders check your credit history, repayment habits, and financial stability to assess risk.
If you had missed or late payments, lenders may:
❌ Decline your application if arrears remain unpaid
❌ Offer a smaller loan amount due to increased risk
❌ Charge a higher interest rate to offset the risk of missed payments
❌ Require a larger deposit to approve the loan
However, if you settle your arrears and improve your credit profile, you can still secure car finance.
🔍 How Lenders Assess Past Arrears in Car Loan Applications
| Factor | Why It Affects Approval | How to Improve Chances |
|---|---|---|
| 📉 Credit Report | Arrears lower your credit score and flag financial risk. | Settle past arrears and wait for your score to improve. |
| 💳 Repayment History | Missed payments indicate potential future risk. | Maintain at least 6 months of on-time payments before reapplying. |
| 🚗 Outstanding Debt | Lenders hesitate to approve loans for applicants with unpaid arrears. | Clear outstanding debts or negotiate a repayment plan. |
| 🏦 Loan Interest Rates | High-risk applicants may face higher rates. | Work with a finance broker to secure competitive rates. |
✅ How to Improve Car Loan Approval Chances After Arrears
If you had arrears on a previous car loan, follow these steps to increase your approval chances:
1️⃣ Check Your Credit Report – Request a free credit report from Equifax, Experian, or illion to check for past arrears or defaults.
2️⃣ Settle Any Remaining Arrears – Pay off outstanding balances before applying for new car finance.
3️⃣ Negotiate a Repayment Plan – If you can’t pay arrears in full, arrange a repayment plan with your previous lender and get confirmation of the agreement.
4️⃣ Wait 6–12 Months to Rebuild Your Credit – Lenders prefer applicants with recent good financial behavior, so wait if necessary.
5️⃣ Make Consistent On-Time Payments – Ensure all current bills, rent, and credit cards are paid on time to show financial responsibility.
6️⃣ Increase Your Deposit – A higher deposit reduces the lender’s risk and increases your approval chances.
7️⃣ Apply for a Lower Loan Amount – A smaller loan means lower monthly repayments, making approval easier.
8️⃣ Use a Finance Broker – Brokers help find lenders who accept applicants with past arrears and secure better loan terms.
🚨 What If Your Car Loan Is Declined Due to Past Arrears?
If lenders reject your application due to previous arrears, consider these solutions:
✅ Pay Off Old Debts Before Reapplying – Clear any remaining arrears or outstanding balances to improve approval chances.
✅ Look for Specialist Lenders – Some lenders cater to applicants with a history of missed payments.
✅ Consider a Guarantor Loan – A co-signer with strong credit can improve your loan application.
✅ Apply for a More Affordable Car Loan – A cheaper car reduces the amount you need to borrow, increasing your approval odds.
✅ Consult a Finance Broker – A broker can help you find lenders who are more flexible with applicants who have had arrears.
🚀 How a Finance Broker Can Help You Get Car Finance After Arrears
A finance broker can assist applicants with past car loan arrears by:
✅ Finding Lenders That Accept Past Arrears – Some lenders specialize in bad credit car loans and consider your full financial picture.
✅ Helping You Strengthen Your Loan Application – Brokers ensure your financial recovery is presented positively to lenders.
✅ Negotiating Better Loan Terms – They help secure lower interest rates and affordable repayment plans.
🔑 Final Thoughts
Having arrears on a past car loan doesn’t mean you can’t get new finance, but it can make approval harder. By paying off arrears, improving your credit score, and working with a finance broker, you can increase your chances of securing a new car loan with better terms.
🚗 Need a car loan but had past arrears? Get expert help today and find the best loan options for your situation!
DISCLAIMER
The information provided on this website is general in nature only and has been prepared without considering your financial needs, circumstances and objectives and should NOT be construed as financial, taxation or legal advice. For more information, get in touch with our experienced partner brokers today.
