Van Loans For Bad Credit 

Updated: March 28, 2024 Author:

Key Takeaway: A bad credit history doesn’t kill your chances of getting a van loan. Lenders often take a holistic approach when assessing van loan applications. If you put your best foot forward and apply to lenders that suit your profile, there’s a good chance you’ll get the funds needed to purchase your new van. 

Who needs a van loan? 

A van isn’t just a vehicle that gets you from one point to another, it’s much more than that. If you own a van, you can easily start your own business and generate extra income. If you already have a business, getting a van can transform your operations.  

In fact, vans are actually at the core of many businesses’ operations. They aren’t just a useful piece of machinery, they are a part of the team. They make several aspects of those businesses smoother, boost earnings, and can take you to the next level.

However, these vehicles don’t come cheap. Whether you’re buying a used van or upgrading to something more high tech, you’ll have to fork out substantial amounts of money.  If your savings aren’t enough to cover these costs, you should, like most people, consider taking out a van loan.

What is a van loan?

A van loan is a lump sum of money borrowed from a credit institution to fund the purchase of a van. It allows you to buy a van outright and start using it immediately. This way, you get the van you need when you need it, without having to worry about the upfront costs. 

After getting the vehicle, you will be required to repay the loan over a period of time agreed with the creditor. Ideally, this payment will be spread over the agreed period with regular payments made to the creditor. After the loan has been fully repaid, you’ll become the legal owner of the van.

Since they’re a type of personal unsecured loan, you don’t need collateral to qualify for a typical van loan. However, the creditor may require that you use the newly purchased van as collateral against the amount borrowed. This reduces their risk and protects them from any losses. Should you fail to keep up with payments, they can repossess the van and sell it to cover the loan.

How do van loans work?

A van loan is just like any other personal loan. The application process is fairly simple and straightforward, although it varies from one lender to another. You can apply for one in less than 5 minutes and get approval 24 hours later or less. 

During the application process, you may be asked to provide the following documentation in addition to the information you’ve supplied: 

  • Proof of income. You may be asked to supply your bank statement for the last three months. 
  • A proof of address to show you’ve been a UK resident for at least the past 5 years. 
  • A copy of your latest tax return.
  • Your employment history.
  • They can also ask for a proof of earnings SA302 from the HMRC

Know that the application process differs from one creditor to another, so you may be asked to provide some documents that aren’t listed above. How much you get, the interest rate, fees, and other repayment terms will also depend on the lender as well as your personal profile. 

Some lenders offer features like preferential business rates, delayed payments and other perks. Always check what each creditor offers so you can pick the best option. It is crucial to fully understand their terms and conditions before you put pen to paper. Once you pull out of the dealership in your new wheels, there’s little to be done if you don’t like those terms. 

Can you get a van loan with a bad credit?

Credit checks are one of the core requirements of a van loan application. If you have a bad credit history, it may impact your chances of getting an approval. However, not all lenders have this requirement, so you can still get a van loan with a poor credit score. 

Apart from that, most lenders take a bird’s eye approach towards loan applications. Other factors such as steady income, size of income, status of driver’s license, and so on are put into consideration in addition to your credit history. 

Lenders’ main concern is determining their risk in giving you the loan. The application review process is about gauging your profile to see if you’ll be able to make timely repayments in the future. If you score big in other areas apart from credit history, you stand a good chance of getting your application approved. 

Furthermore, there are lenders who specialize in helping people with bad credit to secure the loans they need. There should be a specialist out there for you, regardless of what your credit history is. Just know that no serious lender will give you unreasonable guarantees. You’ll still need to prove that you can afford the timely payments and provide the necessary documentation to back yourself up.

In essence, a bad credit score may limit your chances of securing a van loan but it doesn’t make it impossible. You only need the right lender and also put your best foot forward during the application process. With the right combination and adequate preparation, you can get a van loan, bad credit notwithstanding. 

Other van finance options

There are other ways to finance the purchase of a van. Here are two popular options: 

1. Hire purchase agreements. With this deal, the full cost of the van is broken into an initial deposit and a series of installment payments plus interest. You make the initial deposit to get the van, and start making monthly payments, which typically last between 12 and 60 months. After you make the last payment, you’ll become the legal owner of the van. 

2. Personal contract purchase.  Just like a hire purchase agreement, a personal contract purchase splits the cost of the van into a deposit- usually 10% of the van’s price,  and a series of monthly payments. The repayments are smaller in size, and once the contract ends, you have three options. You can either trade the van in for a new one, return it to the lender, or make one massive final payment, called a balloon payment, and walk away with the van.