If you’re looking to get a car on finance, it’s worth remembering that car finance is never guaranteed and there are criteria you will need to meet before you can get approved. Car finance is more accessible than ever before, and it can be obtained by people with differing circumstances. However, there are factors that are worth considering before you start applying. The guide below has been designed to look at the factors that could stop you getting a car on finance and how you can increase your chances of approval.
1. Bad credit score
Your credit score is really important when it comes to getting a car on finance. Whilst it can be possible to get a car in finance with a bad credit score, it’s can also increase your interest rate which means you pay back more overall. The best car finance rates are usually reserved for those good credit scores as they are less of a risk to lend to. A good credit score usually reflects a history of making payments on time and good credit management.
2. No driving licence
If you’re wanting to get a car on finance, you will usually need a full UK driving licence in order to get approved. Having no license can be an automatic decline so having a valid licence before you start applying can be best.
When it comes to getting a car on finance, it can be harder to get approved if you are unemployed. Lenders want to know that you can afford to pay back your car finance deal each month and if you don’t currently have a job, you may be refused car finance. It can be possible to get approved for novated leasing Australia on benefits though as many lenders accept it as a form of income. However, ideally, lenders prefer applications who are in full-time employed and can prove their income.
If you can’t afford to pay for car finance, this can be one of the most obvious reasons you will be rejected. Lenders need to know how you will pay back your finance and with what money. Lending money out to someone who can’t afford it also goes against the rile of responsible lending practices. To prevent this, lenders will require you to undergo an affordability check before you are accepted.
5. Living situation
Lenders tend to prefer applicants who are don’t move home a lot and have a fixed address. This helps to instil more trust in you, reduce fraudulent applications, and also trace the car if you fail to repay your finance. Many lenders also require you to have 3 years address history in the UK before you get approved so it can be harder if you have not long lived in the UK.
How to improve your chances of getting a car on finance
There are a number of factors listed above that may affect your ability to get a car on finance. However, there can be a few easy ways to help get you the approval you’re after.
- Improve your credit score. There is a whole load of reasons why a better credit score can benefit your financial life. For a car finance application, it can see easier acceptances and a competitive interest rate offered. Where possible, you should try to increase your credit score before you start applying for car finance to put yourself in a better position. You can do this by meeting all payments on time and in full, reducing how much debt you owe and not taking on any new credit in the run up to your application.
- Prove your affordability. Even if you get preapproved for car finance, you will need to prove your affordability. This can usually be done by supplying 3 months’ worth of bank statements to give evidence of your income and expenditure. If you’re self-employed or get paid cash in hand, it can be worth putting this money into a UK bank account to help show your earnings.
- Have a full UK driving licence. If you currently have a provisional licence or no license at all, you may be rejected for finance. Usually, you will be applying for finance on the car you will be driving so it can be worth waiting till you have passed your test and have a full UK driving licence before you start applying.
- Save for a deposit. It can still be possible to get approved for bad credit car finance with no deposit if you don’t have one to hand but having a deposit to put down for hire purchase can be beneficial. Not only does it show good financial management to prospective lenders but also reduce how much you need to borrow. This can give you lower monthly payments or help pay your loan off faster.