When you apply for car finance, a lender will receive your application and assess your situation to see if you’re eligible for car finance. Each lender has their own individual criteria that will you need to meet before you could receive an approval for finance. It can be hard to know if you’re going to be accepted or not but there are a few factors that are most common amongst lenders in the UK and the guide below has been designed to help you.
Who can apply for car finance?
In theory, anyone can apply for car finance but whether you get approved or not is a whole other scenario. Firstly though, car finance is a legal agreement which means you will need to be at least 18 years old to be considered for finance. Similarly, lenders have a maximum age cut off too, usually around the age of 70 years old. If you fall between the ages of 18 and 70 years, old you can apply, for car finance but will still need to meet the requirements of a car finance eligibility check too.
Do you need a job for car finance?
If you have no job and no income, then you won’t be able to get a car on finance as you simply have no way of paying back your finance. Lenders tend to favour applicants who are in full time employment and meet their required income amount as the risk is reduce. However, you don’t necessarily need a job to get a car on finance either as there are more options now for benefit income, self-employed workers, part time workers and pensioners too.
Do you need a driving license?
You will need a full UK license to apply for a car finance agreement and can’t get approved if you have no license. There can be options for those who are learning to drive and want to get a car for when they pass their test. However, your chances of being approved increases massively once you have a full UK license so it can be worth waiting until you’ve passed. You will also need to supply proof of your license if you’re approved, and your details will be verified with the DVLA to help reduce any fraudulent applications.
How to meet car finance lenders criteria:
It’s always worth remembering that no car finance company can guarantee car finance to anyone, and you should be wary of any company who promise this. It’s unethical for a lender to give money to anyone who can’t afford to pay it back and they may charge very high interest rates for using their service. Instead, you could consider the below tips to help boost your eligibility for car finance.
- Prove your affordability.
Each lender has their own criteria when it comes to how much you will need to earn to qualify for car finance, but some lenders can set it at around £1000 per month. If you’re accepted for finance, you will need to prove your income and affordability. Lenders will usually ask you to provide at least 3 months’ worth of bank statements and/or payslips to verify your income.
- Work on your credit score.
Your credit score is really important when it comes to car finance approvals. Lenders want to know how you’ve handled credit in the past and your credit report can do exactly that. Missed or late repayments in the past increase the risk to future lenders as you’re more likely to default on future loans too. It can be a good idea to build new financial habits and increase your credit score in the run up to your car finance application.
- Prove your living situation.
Lenders will need to verify where you live and how long you’ve lived there for. You will need to have lived in the UK for at least 3 years and will be asked about your current and/or previous living situation. If it’s a secured loan lenders will need to be able to trace the car and know where it is being kept. The lender owns the car throughout the agreement and if you fail to meet your repayments and they need to take the car from you.
- Research specialist lenders.
If you’re struggling to get approved and have been refused by lenders, it may be because you are applying with the wrong lenders. If you have bad credit or keep getting rejected, you may not be suitable for mainstream or prime lenders as they usually reserve their finance deals for the best applicants. It can be worth taking some time to find a specialist lender who can help with your situation first.
- Explore different finance products.
In the UK, there are 3 main types of car finance agreement that tends to be the most popular and you may be better suited to one form of finance over others. Depending on what you want from your finance deal and your personal circumstances, you may only be suitable for one form of finance. You should research personal loans, hire purchase deals and personal contract purchase agreements in more detail to find out which would be best for you.