How to Get a Loan When You Have Unpaid Defaults

By Angela Monroe - January 17, 2020

If you’re thinking of getting a car loan with unpaid defaults, you may have lots of questions about how successful your application will be. Car loans can be a little overwhelming, to begin with, but if you have bad credit caused by unpaid defaults, you’ll probably want a bit of help to guide you through the process smoothly.

Review your credit file

This is key when it comes to getting a car loan with unpaid defaults. You should always make sure you’re aware of your credit score and have checked your credit file for any errors at all before you start to apply for a car loan. If any of the unpaid defaults on your credit file are incorrect, you can apply for these to be amended as soon as possible via the dispute process, which each reporting agency will offer information on.

If there are defaults on your credit file that you’re able to pay off immediately, go ahead and do this. Getting a car loan with unpaid defaults isn’t impossible but if you’ve got the option to pay them off then this will make the process much easier.

Understanding unpaid defaults

It’s important to understand what the term ‘unpaid defaults’ actually refers to. These are instances where you have owed money or not paid money on time to a financing company or lender, and this has resulted in defaults being put on your credit file.

Sometimes lenders may not have communicated to you that your default has been put on your file – this can be very frustrating as it often doesn’t give you the chance to make things right before it’s too late and you’re applying for a car loan or some other type of credit.

Some of the most common types of unpaid defaults include:

  • Utility defaults: these include late or missed payments on telephone bills, electric, water or gas bills. Generally, it will depend on the lender whether you’re required to resolve these defaults before they will offer you a car loan.
  • Lender defaults: these will usually be defaults to another lender and it can be very hard to get a loan whilst still having lender defaults. In some instances, you may have a valid explanation which a new lender will consider so it’s worth stating your case (this could be something like a medical emergency causing you to miss work and earnings). Often the new lender will base their decision on the size of your previous lender default so if the amount that you owe is small then you may still be offered a car loan.
  • Court judgements: unpaid defaults that result in court judgements can be difficult to shake off. If you have been declared bankrupt you are likely to struggle to get a loan and may be better off waiting until this has cleared from your credit file.

Ways to get a loan when you have unpaid defaults

There are lots of circumstances when you getting a car loan with unpaid defaults may be essential. You may need the car to get from A to B each day, to get to your job, or to get to important healthcare appointments. In some situations, getting a car loan is simply the only option despite the fact you have unpaid defaults and may have to cover the costs of higher interest rates and difficult loan terms.

To help ease things, you could consider:

  • Getting a guarantor: this helps to reduce the risk to the lender that the loan will not be paid back. Often people use a more financially stable member of their family or a close friend to act as a guarantor to help with getting a car loan with unpaid defaults. It’s really important that the guarantor is fully aware of what they are signing up for though and you need to be extremely careful that you don’t put your guarantor at risk of damaging their credit rating if you default on a loan.
  • Look for the right loan: Try to go for a short term loan with the most reasonable interest rate that you can find. Even if you’re getting a car loan with unpaid defaults, there are still options available – you just need to find the right lenders and look in the right places.

 

Ask for help

Getting a car loan with unpaid defaults can be a very stressful process – especially if you’re in need of the car for a particular reason such as your job or your health. At Loans for People with Bad Credit, we have years of experience working with people with bad credit to help them find the right loans for their unique financial situation.

Angela Monroe
Angela Monroe is the Community Manager at The Positive Group, specialising in giving people the information that they need when they need it, and putting you on the path to a fair financial future. She has 8 years of experience in helping Australians find the right finance solutions, and regularly contributes articles to empower Australians with the knowledge they need to become financially healthy.

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