If you’re looking to get a car on finance, you may be wondering what your chances of approval are. For many people, you may have already been refused car finance and if so, it can be really disheartening. The problem is many people apply for car finance without knowing the eligibility criteria or the factors that affect your approval. The guide below has been designed to explore different ways in which you can help to improve your chances of getting a car finance approval and how to overcome the factors that may hold you back.
Increase your credit score
One of the main reasons why you may be declined for car finance is due to the state of your credit score. A low credit score indicates that you may have missed payments in the past, failed to keep up with deadlines, have high levels of debt or have no previous credit history. All of which increases the level of risk you pose to the lender. People with better credit scores tend to see easier acceptances and get access to better car finance rates as they usually have a good track record of meeting all repayment deadlines on time and in full. If your score is a little on the low side, you could consider increasing your credit score in the run-up to your finance application to increase your chances of approval.
Have a full UK driving license
When it comes to applying for finance, you will more than likely need a licence, especially if you will be the one driving the car. Ideally, lenders like to see a full UK license and having no license, or a provisional license may limit your approval rates. If you’re currently learning to drive with a provisional, it can be better to wait till you have a full license to help give you access to more options. There are also options available for European licenses, but many lenders require you to have 3 years of address history in the UK before you can get approved so it’s worth knowing before making an application.
Have a steady income
Lenders will also want to know how you’re going to pay your car finance back and with what money. Having a full-time job and 3 months’ worth of employment history with the same company can be the most desirable to many lenders. Some lenders also set their own minimum income amount before you can get approved too. There are also options for car leasing with benefit income as this is a set income which will be expected each month and will always be the same amount. If you have a part-time job or no current employment, it can be an idea to earn extra income to help prop up your car finance application and have more money to put down for a car.
Compare car finance agreements
In, there UK, there are 3 main types of car finance agreement which tends to be the most popular. Depending on what you want from your car finance agreement and what happens when the car finance deal has ended. It’s worth exploring each agreement in more detail as you may be more suited to one type of finance over others. If you have bad credit, you may be better suited to a hire purchase deal as it is a form of secured loan. This means if you fail to stick to the rules of your finance agreement and fail to pay, the lender has the right to use the car as collateral and take it away from you. From a lender’s point of view, this reduces the risk and helps them to secure the deal.
Choose a smaller loan
If you’re struggling to get approved, it can be beneficial to opt for the smallest loan possible. There are thousands of cars you can choose to finance, from DS3 finance to Tesla finance, there will be a car for you. However, choosing a cheaper car and taking out a smaller loan can not only be more manageable for you, but it could be easier to get approved for.
Find the right lender
If you’re getting declined for car finance, you may be applying with the wrong lenders. Personal loans are usually offered by banks and building societies, these tend to be known as prime lenders and don’t usually deal with people who have varying circumstances. There are lenders such as subprime or bad credit specialist lenders who have bespoke car finance packages for people who are struggling to get approved. Alternatively, you could consider using a car finance broker. Brokers act as the middleman and compare multiple lenders at once on your behalf to help find the best car finance deal for your circumstances.