Buying a car can be expensive and you may be looking for a car finance deal to help you spread the cost. Many drivers now use cars loans or car finance to help them get a car and pay for it over a term that suits their budget. If you’ve already been refused a car loan, you may be wondering ‘how hard is it to get a car on finance?’ There’s no one size fits all answer here as there are several factors which affect the finance process and ultimately, the decision to offer you finance lies with the finance lender.
What do lenders consider when offering you a car loan?
Car finance can be offered by a range of lenders and each of them will have their own individual eligibility criteria. Where one lender may offer you finance, another may see you as unsuitable. However, there are a few common factors lenders consider that you can use as a guide.
- Creditworthiness. Your credit score is important to finance lenders because it helps them determine which type of borrower you will be and the likelihood of you paying your loans back on time and in full. If you have a history of missed payments, CCJs, or defaults on your credit file it can put lenders off as you’re more likely to default on future loans too.
- Affordability. Your affordability is simply whether you can afford to get a car on finance or not. Your budget for car finance should be realistic and you will need to be able to meet every payment over the term. Finance lenders will check your affordability by requesting pay slips and/or bank statements to prove your income.
- Proof of identity. It’s important you prove who you say you are when applying for car finance. To help avoid any fraudulent applications, lenders will ask you to prove who you say you are by requesting a copy of your passport or driving license. They may also use the information on the electoral roll to verify who you say you are, so it’s important you’re already signed up!
Is car finance ever guaranteed?
Many years ago, you may have seen lenders advertising guaranteed car finance but nowadays, it can be hard to come by. It’s unethical for lenders to be giving out to anyone who can’t afford to pay it back. It can lead to more serious financial implications and affects both the lender and the customer. You should be wary of any companying saying they can 100% secure you finance as it may come with high interest rates or monthly payments.
How to increase your chances of getting a car loan.
If you’re struggling to get a car loan or want to put yourself in the best position possible before applying, follow the easy steps below!
Only apply for what you can afford.
It seems obviously but if you can’t afford the loan, you will be rejected by a lender. To help improve your chances of being approved for finance, you should only apply for what you could afford to pay back.
Improve your credit score.
As we’ve mentioned above, your credit score is influential in the car finance process. If your credit score is low due to lack of credit or mishandling credit in the past, you need to show future lenders you can be trusted with their loan. You can do this by reducing any debt you have, making all payments on time and in full and keeping credit usage low on things like credit cards and store cards.
Save up for a deposit.
When you put down a deposit for car finance, it reduces the amount of money you need to borrow from the lender. Lenders may favor you if they aren’t having to lend as much out to you and a deposit can help to secure the deal. A smaller loan amount can also help to reduce your monthly payments or means you could afford to pay the loan off faster.
