If you’ve never taken out car finance before or you’ve already been declined, then you may be wondering what your chances of are getting a car on finance. There are a few factors which can mean you are declined for finance such as credit history, affordability, and personal circumstances such as employment. It can be harder when you are applying for bad credit car finance but there are many ways in which you can help to get approved. So, how do you increase your chances of getting a car loan? Let’s take a look.
Check your credit file
Before you make any application for a loan or finance, you should check your credit file first and have a look at your credit score. It’s also recommended that you get into the habit of checking your credit file monthly. Understanding your credit score and the factors that affect it is key to increasing your score in the future. You should make sure all your information is accurate and up to date. Your credit report will show any applications for loans or credit that you have made, if you find something that you have not applied for then you could have been the victim of a fraudulent credit application in your name. You should also loom for any mistakes on your credit file and check out the financial links section. Your financial links are people who you have taken out credit within the past. If you no longer have any active credit what someone, you should disassociate yourself from them as their bad credit score can be harming yours too. You can receive a copy of your credit score for free from a UK credit referencing agency. If you need to make any changes to your file, you can raise a dispute with the company who provided your credit report.
Review your affordability
Many car finance lenders will require you to pass an affordability check to help get your approved for finance. Lenders provide an affordability check to make sure you can afford to pay back your finance and also, that you don’t get yourself into any financial hardship. You should never borrow money for a car finance deal that you know you can’t pay back. Car finance lenders or brokers will want to do a quick check on your monthly incomings and outgoings to make sure you can afford your finance deal. The more disposable income you have, the more likely you will be approved for finance. You can show your affordability by supplying bank statements or pay slips from your employer. If you are struggling keeping track or want to increase your disposable income for a car, there are many apps which can help you with your finances.
Show potential lenders good financial management
As quickly mentioned above, lenders will usually check your credit score and affordability through the car finance process. Having a good history of meeting any repayment deadlines on time and in full can help to increase your credit score. If you have a history of missing payments or making late repayments, this can make you less favourable to potential lenders.
Save up for a deposit
Having a deposit for car finance can be really helpful to getting you approved. When you put in a larger deposit for car finance, you don’t have to borrow as much from the lender. Having a deposit can also help to reduce your monthly payments so it’s more financially beneficial for yourself too! It reduces the amount of interest you will pay. If you need a car in a hurry and don’t have a deposit saved up, you can also benefit from many no deposit car finance deals.
Avoid multiple applications for finance
If you’re looking for finance, you want to shop around for the best deals but beware of making too many applications in short space of time. Many lenders use a soft search credit check upon application, but some use a hard search credit check which can harm your credit score. What is the difference between a hard vs soft credit search? Making multiple hard searches in a short space of time on your credit file can negatively impact your score. Hard searches allow lenders to see your full credit report and they can also see if you were accepted or declined for credit applications. If you want to compare a few finance deals at once, you could consider using a car finance broker. Brokers are essentially the middleman who look after your application and match you up with the most suitable lender form a wider range of trust UK based lenders.