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Guaranteed car finance may be one way you are able to obtain a loan to buy a new or used car if you have a poor or bad credit rating. It may also be a suitable choice if you have no credit file or you are having trouble obtaining credit due to self-employment.

· Stretching out the loan – if you want to keep down the monthly repayments of your loan then you may be tempted to stretch out the borrowing over a long period. The downside to this is that the car costs more as you are paying out more in interest. Therefore, you may want to give a great deal of consideration as to how long you do take your loan over.

· Paying something towards the car – are you able to put money towards the cost of the vehicle? If you have some money for a deposit, you may have to borrow less and so pay less in interest.

· Comparing loans – just because you have struggled in the past to obtain credit it does not mean that you jump onto the first loan that you are offered. The interest rates that come with a guaranteed loan are usually above the average rates that you may expect to pay if your credit rating is poor. They may also vary a great deal with lenders. If you choose to compare finance options with a specialist motoring website who also sells used cars then you may be able to get a suitable loan.

· New or used car – new cars may cost thousands of pounds more than if you were buying a used car. There are many excellent quality second hand cars on the market so you may want to ask yourself if you really need a new car or if a good used car might suffice. If so, you may have to borrow far less than if buying a brand new model.

· Be aware of penalties – when taking out guaranteed car finance be aware of any penalties that may be included in with the loan. For instance, if you are able to repay the borrowing much earlier than anticipated, there may be a lump sum penalty to be paid.

By: Louis Rix