Getting a car on finance is a great way to spread the cost of owning your next car. A car loan enables you to pay for your chosen car in affordable monthly payments. You can usually get a newer car than your first thought too! Sounds great? But what’s the catch? Car loans are never guaranteed and there are a few checks you may need to pass before you get accepted. The loan amount and interest rate you are offered also varies from person to person. Let’s explore how you can increase your chances of getting a car on finance!
How hard is it to get car finance?
Finance lenders usually have the same criteria to get you approved for finance, but it can vary. They will usually require:
- Credit check. Lenders will usually provide a quick search on your credit file to see what type of borrower you are. Usually, people with good credit get access to higher loan limits and lower interest rates.
- Affordability check. Proving that you can afford to pay back your finance or loan is key. Lenders will usually require you to provide bank statements and documents to prove you have a steady income and your monthly expenditure.
- Proof of ID. Lenders will want to see proof of address and driving license or passport. This can help prevent fraudulent applications for finance.
How can you increase your chances of getting approved?
1. Pay your bills on time
One of the easiest ways to provide that you can be trusted to pay your finance back is to show good evidence of payments. You should make sure you make all your current payments on time and in full. If you have existing credit or high levels of debt, you should try to reduce this first before applying for more.
2. Check your credit file
Before you apply for finance, mortgage or any other form of credit, you should always check your credit file first. Mistakes on your credit file or information that isn’t up to date can negatively impact your credit score. Fixing any mistakes will improve your credit score and increase your chances of getting approved for finance.
3. Consider a joint application
Joint car finance applications are great for a wide range of people. A joint car finance deal is when two people take out finance on the same car. They are then responsible for meeting the repayment deadline. People who have good credit, but a low income could consider a joint car finance application if they have a partner or family member who has a higher income. Joint applications are favourable to lenders as they have an added layer of security that the loan will be paid back on time.
- Save up for a deposit
Having a deposit at hand for car finance can increase your chances of getting approved. Having more to put down means that you don’t need to borrow as much from a lender for your chosen car. It also can work out cheaper for you in the long run as it can reduce your monthly payments.
5. Ask someone to be your guarantor
If you’re worried about getting accepted for finance, you could consider asking someone to be your guarantor. Guarantor car finance is when a friend or family member agrees to make your repayments if you fail to do so. You will be responsible for meeting the repayment deadline each month but if you can’t, your guarantor will have to pay. If neither the applicant nor the guarantor pays, their credit files will both be negatively impacted. Like a joint application, it means that there is more chance of the loan being paid to the lender.
6. Improve your credit score
If you are applying for car finance for bad credit, there are still a number of lenders who can offer you a deal with affordable monthly payments. However, having a better credit score can benefit all aspects of your financial life. If you can, you should improve your credit score before starting a car finance application. Better credit scores enable you to receive higher credit limits, lower interest rate and save you money. You can start to rebuild your credit by making your payments on time, clearing existing debt, having a low credit utilisation, fixing any mistakes on your credit file and registering on the electoral roll to verify your information.