Taking out a car loan gives you the freedom to get a car and pay for it over a term that’s right for you. You can set your own monthly budget and loan term length to pay off the money you’ve borrowed, making it one of the most popular ways to get a car. Car loan providers or finance lenders can’t grantee finance to everyone and the decision to offer you finance is in their hands. The guide below has been complied by Refused Car Finance, a leading car finance broker who help people who are struggling to get approve for finance or have previously been declined. It looks at the most common car finance eligibility criteria and some top expert tips on how to increase the likelihood of approval.
Can I get a car on finance?
Car loans are more accessible than they have ever been and there are more lenders coming to the market who can offer finance to even the most adverse customers. However, lenders still need to put eligibility criteria in place for customers to meet first to help protect their business. From a lenders side of the finance agreement, they want to know the likelihood they are going to get their money back from the customer and the customer can afford to do so too. It goes against the rules of responsible lending for finance providers to be giving loans to people who can’t afford to pay it back. Below are some of the most common car finance eligibility criteria that lenders look for in customers.
Your affordability refers to how much you can afford to pay for finance each month and proof that you can afford to meet the repayments. Lenders may put in place a minimum income that customers need to meet first before they could get approved. This helps to reduce the risk to the lender and make sure applicants can afford to pay back the loan. They will also usually ask for at least 3 months’ worth of bank statements from the customer to prove their income and affordability too.
Your credit history is important for car loans because it can affect the likelihood of approval and also the interest rate you are offered. People with good credit usually see easier acceptances and better interest rates as they are less of a risk to lend to. Based on their credit history, good credit applicants usually have a long history of meeting payments on time and in full, have low levels of debt and use credit little and often. Whilst car finance for bad credit can be possible, you may struggle to get approved with some lenders and your finance may be refused. It can be a good idea to improve you score in the run up to a finance application to help acceptance rates and the interest rate you are offered.
You can’t get a car loan if you don’t have a current driving license as you won’t be able to drive the car. In some cases you may be able to apply for finance as part of a joint application when you have no license, but your partner has a full license and will be driving the car. Applying with a provisional license can be possible to get approved but your finance options are greatly improved if you wait until you have passed your test.
Identity and age.
Fraudulent applications happen all the time when it comes to finance, and lenders want to reduce the risk of this happening by putting compliance checks in place. You will need to be able to verify that you are who you say you are, your age and your living address through the finance process. Car finance applicants need to be at least 18 years old and have a stable living situation which you can prove by supplying a copy of your licence, a utility bill in your name, a copy of your passport and/or bank statements in your name.
How to get approve for finance more easily:
Whilst car loans can’t be guaranteed to everyone, there are few factors you can consider first in preparation for your finance application.
- Keep on top of all your current payments and make sure you meet any deadlines on time and in full to increase your credit score and better your credit report.
- Reduce any high levels of debt you have first before taking on anymore credit. This can help to increase your credit score and also make finance more affordable as you will have less debts to pay.
- Prove your income by having your bank statements and finances in order. If you’re self-employed or have adverse income, it can be best to deposit any money you have into a UK bank account to help show your income and affordability.
- Build a small credit history if you don’t have one already. Lack of credit evidence means lenders can’t predict which type of borrower you will be, and it may even leave you with an automatic bad credit score due to no previous history of borrowing.
- There are many finance deals that don’t require a deposit at the start of the agreement but having some money to put down can help to secure the deal and also makes the monthly payments more affordable.