You might struggle to get a loan if you have a judgment or payment default in your name. 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 challenging. Luckily, there are still ways to buy a car. This article will delve into how to clean up your credit report and purchase a vehicle if you are blacklisted or if you ever have been.
What Does it Mean to be Blacklisted?
Being blacklisted means having a bad credit rating due to missed payments or outstanding debts, limiting 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 turn you into a high-risk client.
Being blacklisted, though, doesn’t necessarily prevent you from buying a car! You 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 for buying a car and whether or not you can settle your debts.
How to Improve Your Creditworthiness?
The first thing you should do is to try “clear your name” and get 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 and no legal action has been taken against you yet, 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 receiving 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 – but 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, 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
Legal action taken against you is usually more serious and will be off-putting for many credit providers.. Even after you’ve paid off your debt, it will be extremely unlikely for credit providers to offer you loans. If this is your case, 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?
Unfortunately, if you’re blacklisted you won’t usually qualify for a typical vehicle loan from the bank and other credit providers. The good news is that there are other ways to finance your new ride, and there are many dealers working 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 a loan. There are also no financing costs: no credit – no interest, and no other expenses. However, you may 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 money necessary, either on your own or with the help of friends and family.
You can also look for used cars at lower prices that might be more affordable. However, this comes with its own set of challenges when you need to inspect the vehicle’s condition and manage sellers, some may even be a little questionable.
Purchasing a new or old automobile with cash might sound like a good opportunity to haggle, but in reality it is time-consuming and can back-fire. Going back and forth with a salesperson may be a frustrating procedure that might take hours before reaching an agreement.
Use in-house finance
The main benefit of in-house finance is that it provides customers with immediate loans rather than the time-consuming alternative. Another advantage is that the customer’s credit score improves when they complete the loan.
However, it would be best to keep in mind that the sellers decide the interest rates which will likely be higher than the banks.
One should be careful with in-house financing, as you even have to pay extra because the pricing includes a higher interest rate.
Blacklisted, need a car? Consider rent-to-buy!
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, after which the vehicle becomes yours. You can also buy out the car at any time. Payments are typically made monthly and contracts are typically 24-60 months, but most companies can arrange for contracts 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 need to put down a deposit and make the first month’s payment. Some companies might be willing to rent the car with no deposit. Numerous dealerships across South Africa offer rent-to-buy cars. Have a look at this list of some 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, find one you like from the list and submit an application form on Planet42’s website. You’ll receive a response 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 buy out the vehicle at any time or for R5,000 after 60 months of renting. Alternatively, you can return the car anytime after 6 months of successful payments and after paying a return fee.
It’s worth it to inquire about the exact contract period, the termination rules, mileage, insurance, and the vehicle’s history before committing.
If you’re interested in learning more about rent-to-buy cars and whether it would be right for you, contact us here or look at some of the more frequently asked questions.