What is the Approval Process for Getting Car Finance?
Before you apply for financing, it would be advantageous for you if you know the car finance approval process. By being familiar with it, you can be more prepared for your application and improve your chances of getting approved. In this article we'll discuss the traditional process for getting car finance, and all the bits and pieces you might need, however you should be aware that some lenders may have a much more streamlined process nowadays - phew 😀
Many car buyers in the UK get car financing to buy their dream cars. While it is a popular choice for many people wanting to purchase a vehicle, not all car buyers know and understand the process.
One of the first things you need to know about the car finance approval process is that lenders have to perform a credit check. This means the car finance company will look into your financial history so they can assess the risk of lending you a substantial amount of money and whether you can afford to pay them back.
Prepare for Your Car Finance Application
Just like buying a house, purchasing a vehicle is a huge commitment. Here are some points to consider and explore before you sign any car finance agreement.
Why Your Credit Score is Important
A hard check on your credit report is a necessary step to assess your car finance application. Lenders use credit reference agencies such as TransUnion, Equifax, or Experian to get information and details about your financial history, as well as your financial situation at present.
Check Your Credit Rating
You can actually check your own credit report and score. There are plenty of services online that allow you to do this. By checking your credit score, you will have the chance to examine the transactions made under your account. If there are any errors in your information or unfamiliar transactions, you can inform the credit reference agency about them so that they can be corrected.
Estimate the Cost of Financing
By knowing what your credit score is, you will also gain insight into the deals that lenders may offer you. For example, if you have an excellent credit score, it’s more likely that you’ll get car finance with low-interest rates. If you have a poor credit rating, then lenders will see you as a high-risk borrower and may decline your application. They may offer you a deal but the interest might be high.
What Details are Needed for My Finance Application?
If this is your first time applying for car finance, it’s good that you’re reading this article so that you can prepare better. Car finance companies will normally require you to provide your personal details and also certain documents.
Personal Information and Employment
You would have to give your full name, birth date, marital status, residential status, and address history for the past three years. After that, the next set of information would be your employment status and history. Prepare the company names and addresses of your current and previous employers for this step.
As for your current employment status, you have to state your job title and salary. For business owners or self-employed applicants, proof of income is required, such as bank statements and other documents relating to your business.
Your bank details are also necessary for a car finance application. Prepare your bank account details such as your account name and number, sort code, as well as the branch address of the bank. Needless to say, the bank account should be under your name. Ideally, it should be an old account that has your records for the past three years.
Since the application is for car financing, it would be best if you can present your driver’s licence. This will show the lender that you are legally allowed to drive. Most car finance companies require applicants to pass the driving test and get their driver’s licence first before applying for finance.
Proof of Address
Prepare your proof of address. You can use your utility bills or bank statements for this. For these documents to be valid, they have to be issued within the last 3 months. Your address history will also be checked so be sure to provide information on your previous addresses for the past three years. Lenders want to know how frequent you transfer residences.
Proof of Income
Depending on whether you’re employed or a business owner, the car finance company will require you to provide proof of income. This could be your payslips, bank statements, tax returns, and other documents relating to your finances. They may not all be needed but just prepare them in case the lender asks for other pieces of evidence of your income.
Car Finance Approval Process
Every car finance company has its own way of processing car finance applications. They check applications using their own set of criteria. If you get rejected by one car finance company, it doesn’t mean that you can’t get financing from any other lender.
While you can try to apply again, don’t make multiple applications in a short period. Keep in mind that the lenders are going to perform hard checks on your credit report, and hard checks can knock a few points off of your credit score. This will decrease your score, making your application less attractive to car finance companies.
If you have a poor credit rating, it would be best to work on improving your score first so that you’ll have access to better car finance deals. Do this by paying off any outstanding loans and debts, as well as setting up a direct debit so that your bills can be paid automatically. Your score will not improve overnight but continue to work on it until it gets better.
For many car finance companies, the approval process usually takes about two business days. That’s not the case with Carmoola because you’ll know the result of your application instantly.
To start, simply download Carmoola on your smartphone and enter your personal details. Also, verify your identity using your driver’s licence. You’ll know the result within minutes.
Got questions for us? Feel free to reach out! We’d love to hear from you.