If you have a judgment or payment default in your name, then you might be struggling to get a loan. You typically won’t be able to qualify for a loan from a bank or a traditional lender, or if you do manage to get vehicle finance, the interest rates will typically be very high. But if you need a car now what should you do? Life happens and sometimes paying your debts on time can be a challenge. Luckily, there are still ways to buy a car. This article will delve into how to clean up your credit report and how to purchase a vehicle if you are blacklisted or if you’ve ever been blacklisted.
What Does it Mean to be Blacklisted?
Being blacklisted refers to you having a bad credit rating due to missed payments or outstanding debts, which in turn limits your car financing options. It’s important to know the exact reason why you’ve been blacklisted so that you can fix it and improve your creditworthiness. However, even after you settle your debts, your credit score can remain low for up to 2-5 years and the fact that you were blacklisted can make you into a high-risk client.
Being blacklisted though doesn’t necessarily prevent you from buying a car! You simply need to get a hold of your credit report from a credit bureau to determine your status. This will help you figure out your options when it comes to buying a car and whether you can settle your debts.
How to Improve Your Creditworthiness?
The first thing you should do is to try to “clear your name” and be taken off the “blacklist”. However, this isn’t always easy.
There are three stages of being blacklisted and your situation and future creditworthiness will depend on which stage you are in.
If You Have Missed or Late Payments
If you’ve failed to make payments on time but no legal action has been taken against you yet, then you can simply settle your debt with your credit provider and pay back what you owe. This will get you out of being blacklisted and you’ll be able to apply for car finance but you’ll still be seen as a high-risk client and you’ll still have a bad credit score for quite a while. This could lead to you being offered suboptimal loans with high interest rates. Have a look at how you can get a car with bad credit by reading further.
The simplest solution would be to pay back your debts as soon as possible. This is much easier said than done.
If You’re in Payment Default
If your credit provider has already handed your debt over to attorneys, then you’re in payment default. This will be in your credit report. In this case, you should figure out if the debt is still with the credit provider or with a debt collector agency. Once you know that, you can repay and settle your debt. This information will remain in your credit report for up to 2 years. You’ll be able to apply for a vehicle loan but you might encounter issues as a high-risk client.
If Legal Action Has Been Taken Against You
Having legal action taken against you is usually more serious and it puts off many credit providers. Even after you’ve paid off your debt, it will be extremely unlikely for credit providers to offer you loans after this. If this is your case, then you’ll usually need to choose one of the three alternative car financing options below.
What Are Your Vehicle Finance Options if You Are Blacklisted?
If you’re blacklisted you won’t usually qualify for a typical vehicle loan from the bank and other credit providers, unfortunately. The good news is that there are other ways to finance your new ride and there are many dealers who work with blacklisted clients.
Buy a car in cash
Buying a car in cash is always an option if you’ve been blacklisted since you will not have to take out any kind of loan. However, if you’ve been unable to pay off your debts, then you probably do not have a large amount of cash available. If so, then there’s always the option to wait to buy a car, and save up the cash necessary in the meantime either on your own or with the help of friends and family.
You can also look for used cars for cheap prices that might be more affordable.
Rent-to-buy is a good option for someone who’s blacklisted since vehicle approval rates are higher than they are at banks. Rent-to-buy dealers allow you to rent a vehicle from them for a fixed period of time after which the vehicle becomes yours. You can also buy out the car at any time. Payments are typically made on a monthly basis and contracts are typically 24-60 months but they can be arranged to fit your personal preferences if needed.
The only documents usually required to get a rent-to-buy car are a valid driver’s license, and proof of income. You will typically also need to put down a deposit and make the first month’s payment. There might be some companies that are willing to rent you the car with no deposit.
There are numerous dealerships across South Africa that offer rent-to-buy cars. Have a look at this list of some of the rent-to-buy dealerships in every major South African city that we have partnered with.
If you’re interested in a rent-to-buy car, simply find one from the list that you like and submit an application form on Planet42’s website. You’ll receive an answer on your application within 1 minute. Planet42 will buy the car from the dealer and rent it to you for a fixed term. You can then buy out the vehicle at any time or for R5,000 after 60 months of renting. Alternatively, you can return the car at any point after 6 months of successful payments and after paying a return fee .
It’s also worth it to inquire about the exact contract period, the termination rules, mileage, insurance, and the history of the vehicle, before committing.
Use in-house finance
Buying a car when you are blacklisted or after you’ve been blacklisted can be a challenge and you might be struggling to get vehicle finance from banks and traditional lenders. Fortunately, there are other ways to go about purchasing a car and there are sellers in South Africa that are willing to work with blacklisted clients.