Zuto Car Finance
Guaranteed Car Financing
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Firstly, does guaranteed car finance exist?
The terms ‘car finance guaranteed’ and/or ‘poor credit car finance’ is meant to draw in individuals that have a subprime* or poor credit history. No company in the UK can currently guarantee you car finance or a hire purchase plan. It’s impossible to do without finance companies eventually going out of business.
*Subprime refers to a loan or credit arrangement for those with poor credit history, typically having what is deemed as ‘unfavourable’ conditions usually resulting in higher interest rates than that of a prime lending arrangement.
But all is not lost. More on this in a moment…
To guarantee car finance would mean freely providing car loans to every individual that requested one, regardless of their employment status, age or personal financial circumstances. Also, someone that has become bankrupt within the last twelve months is not legally allowed to apply for credit. An auto finance company would be breaking the law to give that person an advanced rental scheme of any type.
An opportunity for those with poor credit file history
Compared to a decade ago there are many more lenders accepting ‘subprime’ individuals for car finance. So, there is a realistic opportunity for many people to access car finance that perhaps couldn’t have done so just five years ago. Finance companies supporting this model include Zuto Car Finance and CreditPlus.
What’s the catch?
If you have a poor credit history but qualify for poor credit car finance there is a price to pay, and it’s a financial one.
Firstly, some interest rates on poor credit finance deals are extraordinarily high. While a high street lender can offer loans at a base rate (subject to status, of course), a poor credit lender can charge anything from 12% interest rate right up to 25%. I have even seen some companies charging even more.
So, high-interest rates and APR’s have to be expected. But because the risk is deemed to be much higher for subprime lending compared to that of prime lending it’s easy to see why interest rates are inflated.
However, if you fall into the poor credit history bracket and are in serious need of a car, ‘guaranteed car finance’ lending can be life changing. Let’s not forget that just because someone has a checkered credit file does not mean they are not going to fulfil a finance agreement and make all of the monthly payments. Many such people have legitimate reasons for their poor credit history and have endured difficult circumstances on their road to financial recovery.
Companies like Zuto Car Finance are actively supporting people to improving their credit score by supplying car finance to the sub-prime market. Once an auto finance agreement has been accepted and an individual is making their repayments on a consistent basis, their credit file quickly repairs, their credit score goes up and they can get a more competitive interest rate in the future.
Zuto Car Finance Review
Here, I’m gonna focus on Zuto. I’ve done a lot of business with them over the years and found them to be contactable and affordable for consumers with excellent customer service and follow up. I have noticed a few poor reviews on their Google page but nothing that substantiates not applying.
Obtaining Car Finance With Zuto (formally Car Loans 4 U)
Zuto loans work a little differently from most other car finance companies as you can apply for a loan before you’ve found a car (recommended.) If and when you’re accepted, you’ll know how much money you are spending on a car, the loan repayments and other terms of the loan. This gives consumers an opportunity to reflect on the finance proposal and decide if it’s an affordable option for their personal circumstances.
If you decide that the package isn’t right for you, there is no obligations and it’s fine to just say no.
Zuto (Car Loans 4 U,) do NOT sell cars themselves. They only provide the finance for them. However, they do hold a database of vehicles that their verified dealers have in stock.
What is the lending criteria?
I can’t give you any perfect answer here, but I can give you a good idea of what’s required…
Zuto have a panel of lenders and are able to consider car finance applications from people with a wide range of financial circumstances.
You should apply if:
- You have little or no deposit (subject to certain terms of course)
- You have some poor credit
- You are self-employed
- You are young ( but at least 18 years old have a good credit rating)
- You are not on the electoral role
- You are in the Forces (must have a UK address other than barracks)
- You need to refinance your existing car
- You have applied for credit elsewhere in the last few weeks or months – Zuto will initially conduct a soft search which doesn’t leave a trace on your credit file. The soft search is enough to determine the likelihood of lending you money
- You need finance for a commercial vehicle or motorbike
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Adverse Credit Missed Payments and Arrears
Zuto have several lenders (Paragon, Money Barn etc) who will provide finance to people who have missed previous payments or have a poor credit rating. But as I’ve spoken about already, there are no guarantees here and the only way to really find out if you’ll be accepted is to go ahead and apply.
If you have an IVA (Individual Voluntary Arrangement)
The firm will require a confirmation letter from your Insolvency Practitioner that they are happy for you to access finance again. If your IVA has passed and been settled then you’re fine to go ahead and apply.
If you’ve been bankrupt in the last 12 months you do NOT meet the qualifying criteria. If you’ve been discharged from bankruptcy for at least 12 months you may be considered for finance but this is under some strict guidelines.
If you have outstanding CCJs you’re still able to apply for finance as long as the CCJ is more than 4 weeks old.
If you apply for car finance for bad credit and you’re accepted you’ll know how much money you can spend on a car and the exact terms of the loan. Next, you can begin searching for cars that meet the criteria of your lender. Age and mileage are the main factors that determine if a lender is happy to finance. Generally, the car needs to be less than 10 years old and fewer than 100,000 miles, although this seems to change from time to time. Ideally, the car should be a maximum of 8 years old and under 80,000 miles.
Note: When choosing a car you should consider its value at the end of your finance agreement. The more the car is worth at the end of the agreement the better for you. So, cars such as Volkswagen, Audi, Mercedes, Toyota typically hold their value well. In contrast, cars such as Hyundai, Kia, Suzuki tend to lose their value much quicker.
After you have found your car at a dealership and run all of the checks outlined in my car buyers guide, it’s time to tell the dealership that you have finance arranged with a lender.
Telephone Zuto and inform your adviser that you’ve found a car and want to buy it.
Your advisor will then contact the dealership directly and work through the details.
From a dealer’s point of view, Zuto may be a little frustrating to deal with. They want lots of information, invoices, warranty details etc. before they’ll make a pay-out to the dealer (most of this red tape comes from the lender themselves i.e Money Barn). But for you, the consumer, it’s all good because Zuto Finance goes to great lengths to ensure the car is legitimate and worth the money being asked.
Tip: Ask your advisor to request that the dealership adds a 12-month warranty into the deal free of charge. This is a good thing to do and most dealers will agree if it means closing the deal and getting paid out.
It can take several days for the lender and dealer to sort all the paperwork and get the agreement signed off. Once they do you’ll be able to pick up your new car.
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The Used Car Guy