Car finance is a great way to spread the cost of owning your own car into affordable monthly payments. So, it’s no wonder that the popularity of car loans is on the rise in the UK! There are a few factors to consider before you can get accepted for a car loan. But they can be very accessible for a range of different circumstances.
Work on your credit score before applying
It is a common misconception that you can’t get approved for car finance with bad credit. However, there are many bad credit car loan specialists who can help. Having a better credit score does make it easier for you to get approved and can also lower your interest rate. Car loan lenders want to know that you can be trusted to pay your finance deal on time and in full. If you’ve had trouble in the past, meeting your repayment schedule then you can be seen as more of a risk to lenders. This will increase your interest rate at a higher percentage. This increase the amount you will pay overall.
There are a few easy ways in which you can increase your credit score. Use them to increase your chances of getting accepted for a car loan.
- Check your credit file for any mistakes and contact your credit reverencing agency to fix them. Having an incorrect address or any credit searches on your file which were not provided from yourself can negatively impact your credit score.
- Dissociate yourself from any financial links who have bad credit. If you have taken out a joint application with a family member, partner or spouse then you will become financially linked on your credit file. If you no longer have any active credit with them and they have bad credit, then its best to dissociate yourself. This is because their score could be impacting yours. You can do this by contacting your credit referencing agency.
- Pay all your bills on time and in full. As mentioned, lenders want to predict what sort of lender you are and if you will be trusted to pay back a potential loan from them. Making all your repayments on time and in full will increase your credit score.
- Register on the UK electoral roll. It’s easier for lenders to identify who you are and your current living address.
- Consider a credit building card when you have no credit. It’s a common misconception that having no credit means you will be accepted for credit. However, you should consider using a credit building card. This will show evidence that you can be trusted to pay your loan back.
Have a steady source of income
It can be easier to obtain car finance when you have a solid form of income as many lenders will ask you to provide proof of bank statements upon successful application. Having regular income each month improves the likelihood that you will be able to make your repayments. However, there are now many options available for self-employed, people who receive benefit income, retired and military workers.
Save up for a deposit
The best practice is to have a deposit to put down for a car loan payment. You can increase your chances of getting approved. A deposit also reduces the amount that you need to borrow from a lender, reduces your monthly payment and also less interest for you to pay. However, if you need a car quickly and don’t have a deposit to put down then there are many no deposit car finance options available.
Limit the amount of credit applications you make
It’s a great idea to shop around for the best car finance deals. However, multiple hard searches on your credit file can affect your score. If you are shopping around for car finance, you should stick to soft search credit checks only. These aren’t recorded on your credit file and don’t affect your credit score. You could also consider using a car finance broker who compares a range of different loans and lending options on your behalf. He then matches you up with the most suitable lender. You can then take your finance deal to any UK dealership that is verified by the financial conduct authority.