Financing a car has been a popular choice for drivers for a while now. The higher purchase price of both new and used cars is making it harder for drivers to afford to buy a car with a single lump sum. Due to this, more drivers need help to get a car and want to spread the cost into monthly payments instead. Car finance lenders in the UK give drivers the opportunity to borrow money to fund their car purchase and pay it back over a term that suits their budget. Before you can get an approval for finance, you will need to meet the lenders criteria first. The article below looks at the most common eligibility checks lenders put in place and how to increase your chances of being eligible for finance.
Can lenders guarantee finance to drivers?
Finance lenders take a risk when they lend money out to drivers to buy a car and they may be worried about the likelihood of getting their loan back on time and in full. To help reduce the worry of them not getting their money back, lenders put their own individual criteria in place that applicants will need to meet. Car loans can’t be guaranteed to all customers because it would be unethical of lenders to give money to anyone who can’t afford to pay it back or have a history of missed payments. Your eligibility for car finance can vary with different lenders as they all have the right to set their own criteria but to help you along, we’ve highlighted the most common roadblocks to car finance and how to overcome them.
1. Work on your credit first.
Lenders prefer applicants who have a strong history of meeting their financial commitments. Good money management usually means a good credit score and lenders reward applicants with better credit with lower interest rates on their finance deal. You will usually have to pass a credit check before you can get accepted for finance so lenders can assess the likelihood of paying your loan back on time and in full. It can be a good idea to check your credit before you start applying for car loans and increasing your score if you need to.
2. Prove your income.
Some lenders are more lenient about credit score than others and instead focus on whether you can afford finance or not. They can do this through an affordability check which may ask for your current income and proof of affordability through the use of payslips or 3 months’ worth of bank statements. Lenders may have a minimum income amount which you will need to meet before you could receive an approval which can be dependent on the individual lenders but usually this can be around £800-£1,000 per month.
3. Apply when you have a full UK license.
To put it simply, if you don’t have a driving license, you can’t get a car on finance. There can be options for those who are learning to drive with a provisional license, but your options can increase massively if you wait until you have passed your driving test. Lenders tend to prefer applicants who have a full UK license and will also ask for proof of licenses and verify your information with the DVLA too.
4. Age isn’t just a number.
In some cases you may be too old or too young to finance a car. Car finance is a legal contract that you sign and agree to meet each and every payment and follow the rules of the agreement. This means you will need to be at least 18 years old before you could be considered. Younger people between the ages of 18-23 may also struggle if they have bad credit due to no previous history of borrowing. Similarly, lenders can have a maximum age cut off too which is usually around 70 years old, but it can be worth checking with the lender first.
5. Prove your identity to avoid fraud.
When you finance a car, the lender will need to know that you are who you say you are and where the vehicle will be kept. They will ask you to verify your living address, usually through proof of a utility bill at your current address or a similar document. Some finance lenders may also require you to have lived in the UK for 3+ years in order to be considered and may also ask for your previous living address too. You can verify your identity by supplying a copy of your passport or driving licence. Lenders need to verify you are who you say you are to help prevent the risk of a fraudulent application.
