Having a dream car without buying it upfront is an apt way to live your life regret-free. For this, one explores the best car finance deals and applies for the same.
Only one out of 5 car finance applications gets approval. A frustrated person with a low credit score makes several attempts that affect the credit score furthermore and eliminate any possibility of securing one. Even if one gets the finance, he eventually pays more than the car’s price. It is the worst situation. Instead of improving the lifestyle, it makes it harder for individuals to survive.
Guaranteed car finance on bad credit is the best solution to this problem. It helps a borrower with a bad credit score qualify for a car finance deal at a low-interest rate and fees. It implies the borrower can save 40% more than he was giving previously.
You can tick off owning a car on your list along with saving well with a guaranteed finance deal. In this, one needs a third person to have a good credit score to confirm the loan. If one lacks a guarantor, the borrower can hassle-free secure the loan by putting up collateral.
However, getting car finance depends on individual situations. Lenders prioritize good credit score borrowers as they reveal proof of responsible borrowing. And there is a good chance he will get the sum borrowed at the defined loan term-end.
On the other hand, individuals having less-than-ideal credit struggle amid the long trail of checks that a lender conducts. The reason is that most of these individuals are unaware of the lender’s requirements.
What Does a Lender Look for Before Approving the Car Finance Application?
Did the lender reject your application even after getting all the documents? Then probably, you are not familiar with other parameters that a lender considers before approving a car finance application. You must have missed any of the below parameters:
1. Identity Proof
In this, the driving license works as identity proof. The lender looks for the full name, D.O.B, marital status, residential address for the past three years, and mortgage. For this, a lender may ask to provide proof through utility bills like gas and electricity. He may also ask for a council tax receipt.
2. Employment History
Employment history is the most crucial aspect in deciding approval. A lender evaluates 3 years of employment history and income.
It is a critical aspect to tap into the borrower’s affordability scale. It is the reason self-employed find it hard to qualify. In the absence of income clarity, the lender fails to evaluate the affordability. To improve chances, one must file a self-assessment. Self-employed must provide tax return slip, invoices, etc., as proof.
3. Driving License
As you apply for car finance, you must have legal proof of your driving skills. Without a valid driving license proof, most companies reject the application. You must provide a valid passport if you have lost your license or do not remember where you kept it after driving last. The lender will confirm from the company whether you had the license or not in the past. Some may accept a provisional license, but the terms may vary then.
4. Credit report
As mentioned early in the article, a credit score helps a lender tap to credit management skills. On the other side, a credit report gives a complete view of what type of borrower you are. A lender looks for the following aspects in a credit report:
- Your repayment patterns: pay in full or lump-sum
- The total amount you owe
- Whether or not you are on an electoral roll for address proof
- Record of CCJs (County Court Judgements)
- Complete loan applications submitted in the past 6 months
Suppose a lender finds too many loans lately in your credit report. In that case, it casts an impression of an irresponsible borrower and casual outlook towards the loan, which may reject the car finance loan application. Thus, optimize the credit score before applying for car finance deal. If the lender sees you paying high-interest loans lately, he may approve. Moreover, it will improve your credit score, and you may fetch one at comparatively low-interest rates.
6. Bank details
The account one pays the repayments from should be in his name. The lender needs an account number, branch code, and address for account verification.
Which of these do you believe you lack before applying for a car finance application? If you got the answer, work towards improving it. It will help increase the car finance application approval. Now, let’s see what else you can do to increase the loan approval chances.
5 tips to increase the chances of securing a low-interest car finance deal
By now, you must have got familiar with the lender’s requirements. These ways will help you meet those requirements and qualify the car finance:
1. Know the eligibility criteria
Before exploring the deals, tap into the criteria that a lender looks for while approving the application. If you meet the above criteria, you may qualify for the loan. Here are some additional requirements:
- You must be a UK citizen for over 36 months
- One must be 18-74 years of age
- Must have an income over £10000/month
- Students may get car finance if they work part-time
- If you have been working as a self-employed for over 12 months, a lender may consider the application.
2. Use an eligibility checker
Before applying for car finance, always use an eligibility checker. It is a free way to check your eligibility and affordability before actually getting the credit report scanned. It gives one an idea of how likely he is to get accepted for the loan.
3. Save for a car finance deposit
It is one of the most significant ways to increase your odds of qualifying for car finance even at a less-than-ideal credit score. If you have a credit score of less than 660, research lenders provide car finance within that credit limit. However, you may find only a handful of them; a car finance bad credit direct lender works specifically on improving the borrower’s prospect of securing car finance. In this, you may fetch a car finance deal even at inappropriate credit if you abide by the below conditions:
- Provide a higher upfront deposit to the lender. It will not only optimize the interest rates but makes the repayments affordable too.
- Make regular payments to the car finance agreement. Lenders help calculate the total monthly repayments for bad credit holders by evaluating the expenses and monthly income. You may get the loan approval if you believe you can manage it.
- Have realistic expectations before borrowing, analyzing your income sources, expenses, and credit score.
4. Register on an electoral roll
Register for an electoral roll if you have been living in the UK for over 4 years and share no plans to transfer. An electoral roll is confirmed proof of your residential address. Having one can boost your credit score by 50 points! The lender passes the information to the credit agencies, which adjusts the credit score accordingly. It mostly proves positive for the borrower. Apart from that, it eases the hassle for the lender to contact you and confirm your identity.
5. Do not err while applying
The lender may reject the application form if you provide incorrect information. It will decrease your credit score temporarily. Double-check your answers before submission. If confused about some, seek solutions instead of filling them casually.
Securing a car finance deal becomes easy when the borrower shares complete knowledge about the eligibility and affordability criteria. Work on your credit score and fetch the most affordable car finance deal.