No finance company can promise guaranteed car finance. There are a lot of factors that affect your chances of being approved such as County Court Judgements, missed payments, bankruptcy, defaults and arrears, credit score and employment status. If you’re looking for car finance but worried about bad credit or being declined, you can find everything you need to know here.
Have you already been refused car finance?
If you’ve already been refused car finance, it can be disheartening and you may be confused as to why you were declined. Because you’ve been refused by one finance company, doesn’t mean you will be refused by all of them. One of the main reasons you may be refused is your credit score, but we’ll come to that in a minute! Also, some lenders have specific criteria that you may not meet and therefore be declined. It’s also harder to get accepted if you don’t have a Full UK Driving Licence too, there are some lenders who do accept Provisional Licences though. Your employment status can also determine your chances of getting approved. Obviously if you earn a steady income and are in fulltime employment, it is generally easier to get approved. However, there are many options available for self-employed, careers and applicants who receive benefits.
How do I improve my credit score?
If you are applying for car finance with bad credit, you may think you’ll never get accepted. Our top piece of advice is that it will take time. If you have bad credit, you need to prove to lenders that you can make all of your repayments on time and are reliable. Trust needs to be built, so proving you can easily make all your repayments on time for at least 3 months is a great indicator to lenders that you’re ready for car finance. Another way you can easily improve your credit score is the get yourself on the electoral roll. This gives lenders the security that you are who you say you are and also provides proof of address history. It’s also a good idea to check your credit file yourself, make sure all your information is up to date and sever ties with anyone that you no longer need a joint credit file with. If you are financially linked to someone with bad credit, this could drag your score down.
Refrain from making multiple searches
If you make multiple car finance applications in a short space of time, it can indicate to lenders that you are desperate for finance or a loan. As we have discussed, if you have bad credit you can get refused for car finance, but if you get refused for car finance on multiple occasions, this could harm your credit score even more! It can also look like you aren’t making an informed decision when it comes to your car finance.
Can you afford to put a deposit down?
It’s ok if you don’t have an initial deposit to put down as there are many no deposit car finance options available. A no deposit deal can be a great option for you as it means you can get your car and not have to worry about a hefty initial deposit. On the flipside though, even a small deposit can strengthen your application. As this indicates to lenders that you either have a good income, have savings or that you’re generally in a good financial situation.
Do you know the car finance lingo?
Don’t get bogged down with car finance jargon. Increase your chances of getting approved by knowing what you’re actually applying for! Within car finance, there are different types of finance deals. This can include a personal loan, Personal Contract Purchase (PCP) and Hire Purchase (HP). They are all similar in a way but have different terms and conditions. A personal loan can usually be gained through a bank, building society or some finance lenders and allows you to pay for your car with the loan. This is good way to finance your car as you will own the car and only be paying back the loan. PCP agreements means the finance company pays for the car, usually within a dealership and then you pay back agreed monthly instalments to the finance provider. Then at the end of the agreement you have 3 choices, buy the car, hand the car back or part exchange it. HP is similar to PCP but you are sometimes required to put down a small deposit and then follow it up with fixed monthly payments until the end of the agreement.
Do a soft search first
Did you know you can check your chances of getting accepted for car finance even before you make a full application? With a car finance checker you can see where you currently fall on the credit scale. A soft search means you can check your credit and chances of being approved for car finance without leaving any mark on your credit file. This gives you the peace of mind that your credit score won’t be harmed.
Set your budget
No one can tell you how much to budget for your car finance. It’s all down to you. When you apply for car finance you’ll be more than likely be asked how much you want to spend a month and over how long, this determines the loan amount you’ll be eligible for and how much your monthly payments will be. When you set your budget, think about how much you have to spend on a car but also factor in other payments associated with owning a car. You will also need to spend money on car insurance, road tax, breakdown cover, fuel costs, maintenance costs such as MOTs and services and any unexpected repair costs.