Can I buy a car on credit if I’ve been blacklisted? Is there any type of car finance available for blacklisted people? This article hopes to answer those questions – so that if you’re a blacklisted consumer, you’ll know what your car-buying options are.
What does it mean to be blacklisted? For many reasons (ignorance is one of them), there is a stigma to being blacklisted … as if you are on the FBI’s Most-Wanted list. Thankfully, it sounds worse than it is.
In fact, being blacklisted, here in South Africa anyway, is not the end of the world. It’s quite a broad term that usually refers to you having a bad credit score by either having an account in arrears or having a judgement against you. This is usually due to missed repayments.
What is important to understand is why you are blacklisted and to know that even if you settle your debts, your credit profile can remain “tainted” for 2 years and, sometimes, even up to 5 years.
The first thing you need to do is get a better understanding of your credit score. The articles below will help you figure it out.
Read: How to get a good credit score
Read: Your credit score: How to fix 3 common problems
Car buying options when blacklisted
Thankfully, there are alternative options for you if you are blacklisted.
Buy a car with cash
You can opt to buy a car with cash – but the chances are that if you are unable to pay off your debts, you don’t have large amounts of cash lying around, so you might have to start saving. You might be able to make arrangements with your employer, a close friend or a relative to help with financing the car – but again, this might put your job and/or friendship at risk if you are unable to make the repayments.
If paying cash is not possible, then your best option is to consider leasing or renting a car.
Rent-to-Own or Car Subscriptions
Rent to Own has become a more popular option for vehicle financing because it sidesteps some of the restrictions of the National Credit Act to provide options for blacklisted consumers.
A “rent-to-own” or “rent-to-buy” vehicle finance plan is an agreement through which you can rent/lease a car by paying for it throughout a contract term. Most of these agreements require a deposit to get started. In general, the deposit is a minimum of R5 000 to R10 000. Just remember, if you have a car right now that you can trade in, then this can be the source of the deposit.
Rent-to-Own contracts can vary from 12 to 60 months in duration and you must pay an agreed premium for the duration of the contract term. The premiums usually include rental costs, comprehensive insurance and a tracking device.
At the end of the agreement term, there is usually a lump sum that you need to pay for the car to become yours i.e. for ownership to be transferred to your name. If you do not want to keep the car, or do not have the lump sum, then the car can be returned and then you can move on to another vehicle/contract.
Rent to Buy usually offers much better flexibility than vehicle finance, because it offers easier options to terminate a contract (with the former, you’re locked in for many years). However, because most Rent-to-Buy customers have been rejected by banks or are considered “high-risk clients”, the premium can be expensive.
Another option is the pre-paid plan route , i.e. renting a vehicle month-to-month. Basically, simply top-up your account to activate it. Your first top-up will be for an amount equal to the refundable deposit and 30 days of driving. When your balance is low, you will be prompted to top-up your account via a payment link for another 30 days of driving.
You can subscribe for as long as you like and change of cancel at any time without penalties due. The cost includes comprehensive insurance, a warranty plus a tracking device. Sometimes, even a service plan is included – it depends on the model you get.
Read: Rent-to-Own financing & blacklisting
Alternative Financial Institutions
You can also approach microlenders to loan you money to buy a car. They will assess how you manage your debt and if you can afford a loan. You won’t qualify if you are under debt counselling, debt review or debt administration. Some microlenders will decline finance to those who have judgments against them.
In-house finance can be obtained from dealerships that provide such a service. Dealership interest rates are usually higher. Not all look at your credit rating, but whether you can afford the monthly payments. This can also help your credit score as the dealers report your payment habits to the credit bureau.
First and foremost, your best option is to understand your credit score, work to improve it and get your name off the “Black List”. See also: What is a Credit Score and why is it important for vehicle finance?
For more expertise about car finance
Visit our Car Finance page, where we provide you with explanations, advice, and guidance to help you better understand the world of vehicle finance.
