Top 5 factors that affect car finance approval rates
If you’re looking to get a car on finance, you may be wondering what your chances of approval are. It can be hard to get a car on finance with a guaranteed approval as there are a number of factors that can affect your approval rating. You should be wary of any car finance companies offering guaranteed finance as it is unethical and may see you face a sky-high interest rate. If you’re in a position where you have been declined car finance already, you may know exactly where you have gone wrong or be wondering why. The guide below looks at the top 5 factors that affect car finance approval rates and how to overcome them.
If you’ve been declined car finance, it may be due to the simple fact that you can’t afford car finance. When you apply for finance, lenders want to know how you’re going to pay your finance back and with what money. Many car finance lenders also have their own criteria which indicates the minimum income that you should earn before they would consider you for finance. Its crucial that lenders abide by responsible lending practices and don’t give car finance to any applicant who can never afford to pay it back. You will usually have to undergo an affordability check you make an application and lenders will want you to prove your income too.
2. Credit score
One of the biggest factors that can affect your car finance approval rates is your credit worthiness. It can be hard to find a car finance with no credit check as lenders want to assess how you’ve handled credit in the past. Missed or late payments are the most common reasons why you may have a bad or low credit score. This increases the level of risk that the lender takes when they give you finance. It can be worth increasing your credit score in the run up to your car finance application and reducing any debt you owe before you get a car. This can help to increase the likelihood of getting approved for car finance, get you a better finance rate and also help make your deal more affordable.
3. Employment status
When it comes to getting any sort of loan or finance, lenders usually look for stability. This can mean not moving home often but also having a stable form of employment. Your employment and earnings can be used as a deciding factor for finance to see if you can afford to pay back your loan on time and in full. Being in full time employment is the most favourable to lenders but it can be possible to get car finance on benefit income too if you meet the income criteria. If you’re self-employed, you can get a car on finance, but it can be worth preparing your finance first. For example, if you get paid cash in hand, you could put any earnings into a UK bank account to prove your affordability.
4. Driving licence type
You don’t necessarily need a full UK licence to get a car on finance, but it is essential if you intend to drive the car you are financing. For most people, they will be applying for finance on a car for themselves and lenders will request proof of a full, valid licence. It can be possible to get a car with a provisional licence, but your options may be limited, and it can be best to wait until you past your test before you apply. Many UK lenders also accept European licences too, but you may be required to have 3 years’ worth of address history in the UK to help prove your stability.
Your age can affect your ability to get a car on finance and many lenders have age requirements before you can get a car on finance. Car finance is a legal agreement which means you will need to be at least 18 years old before you can get approved. It can be harder to get approved when you’re between 18-24 though as you may not have had much time to build a credit history yet. Similarly, many lenders won’t lend to anyone over 70 years old. It’s worth checking the age criteria of different lenders before you start applying.