More drivers than ever are choosing to finance their next car rather than pay for it in a single lump sum. The cost of both new and used cars can be too much for drivers to afford so instead, finance allows you to spread the cost into monthly payments that suits you, and you could even get your dream car! However, car finance is never guaranteed, and you will need to meet the lenders criteria first before you can receive an approval for finance. There are a number of factors that may stop you getting finance and the guide below looks at each in more detail. Its important to know the criteria you will need to meet first and also how to overcome these finance roadblocks to get you on your way to your next car on finance!
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1. Bad credit.
One of the biggest factors to getting a car finance approval is your credit score. A finance lender will give you the money to buy a car or they buy the car from the dealer, and you pay the lender back in monthly instalments. Lenders want to know how likely you are to pay your loan back on time and in full and can assess this by checking your credit report. Missed or late repayments in the past or no previous borrowing history can make no credit loans or bad credit finance much harder to obtain. If you’re struggling to get approved, you could consider increasing your credit score in the run up to your finance application to help better your chances of approval and get a better interest rate.
2. Insufficient income.
Lenders will also need to know if you can actually afford to pay back your loan in full and on time. They want to know how much you can afford to put towards your finance deal each month without selling yourself short. To do this, they will usually ask you to undergo an affordability check on approval and also prove your income through supplying bank statements and/or payslips from your employer. Finance lenders also need to abide by the rules of responsible lending which doesn’t allow them to lend to anyone who can’t afford to finance a car.
3. No license.
It may seem daft, but many people apply for finance when they don’t have a license. Lenders prefer applicants who have a valid full UK driving license and will request proof of your licence when you are approved with a lender. There can be limited available to people with a provisional licence, and it can be worth waiting till you past your test before you apply for finance to help better your chances. You don’t need to wait for your new licence either as lenders can check your details with the DVLA to verify your full license.
4. Don’t meet the lenders criteria.
Not all car finance lenders have the same criteria you need to meet before they would offer you finance. Each lender has their own and it can be worth using a car finance eligibility check first to see if you’re likely to get approved. Some mainstream lenders won’t accept people with low credit scores, but others don’t car as much and instead focus on your current affordability to get you approved. It can be worth shopping around for specialist bad credit lenders too if you’ve previously been refused before.
5. Age is holding you back.
Car finance is a legal agreement so it means you need to be at least 18 years old before you could be considered. Many lenders also have a maximum age limit too which is usually around 70 years old, but it can be worth checking with your chosen lenders first. Applicants in the ager orange of 18-21 may also struggle to get approved for finance due to lack of credit history so it could be a good idea to build a small amount of credit evidence first before you commit to getting a car.