What Is The Validation Process For Getting Car Finance?
Thinking of spreading the cost of your next car purchase but not sure what it entails? 🤔 Maybe you've never borrowed money on this scale before and are not sure what to expect about the process. Ensuring that your car finance application will have the best chance of getting approved means you have to make the right preparations. One way to get ready for this is to know and understand what the car finance validation process actually is.
Many car buyers prefer to get car financing so they do not have to pay the full cost of the car in cash. Since this is a big purchase and may take up a big chunk of your savings, spreading the cost of the vehicle for a few years is often the more attractive option. Car finance allows you to drive away a new car without draining your bank account.
What is the Car Finance Validation Process?
Commonly, the validation process of getting car finance includes a credit check as well as an assessment of your financial capabilities when it comes to repaying the loan. Of course, you would also need to provide proof of identity and other essential documents to the car finance company. Here are the important details you need to prepare for your application.
Proof of Identity
To prove that you are the person applying for car finance, you will need to provide a copy of your driver’s licence. Other car finance companies might require other supporting identification documents like your passport. The lender will check your full name, date of birth, civil status, and residential status. Your IDs should be able to show these details.
Proof of Address
Lenders will also check your proof of address, including your address history for the past three years. See to it that the details you provide are accurate, especially if you’ve been renting and have moved residences a number of times.
Car finance companies take applications seriously and will carefully check the accuracy of the details you provide. Don’t risk derailing your car finance application with the wrong information about your addresses. It may seem insignificant, but everything is taken into account during the car finance validation process.
For your proof of address, you may be asked to provide at least two documents for this. You may present a utility bill such as a gas or water bill. You may also present your bank statements and council tax as proof of address. Make sure that your name is there on the documents, along with your address.
To apply for car finance, you'll need to have a bank account. You would need to provide your bank account number, branch address, sort code, and other essential pieces of information about your bank account. It also has to be the account you’ll use to make your repayments to the lender every month, and the one where your salary is paid and your outgoings come from.
When applying for car finance, you need to show the lender that you have the resources to repay the loan. The lender will request your employment information, such as the length of your employment in your current company, your position in the organisation, and details of your salary.
In case you are self-employed or a business owner, prepare your business documents and also your bank statement. Some lenders may want to see three years of your SA302 from HMRC as well. With the use of open banking, some lenders will use this to look at your ability to pay rather than ask for payslips etc., so this really speeds up the process of validation.
Since you’re applying for car finance, the lender would want to make sure that you are legally permitted to drive. If you want to get the best chance of approval for your application, make sure that you have a valid driver’s licence. Many car financing companies would automatically reject applications from car buyers who don’t have their driver’s licences yet.
What is a Credit Check?
Car finance companies also perform credit checks because it is a crucial part of the car finance validation process. A credit check lets the lender know your past behaviour when it comes to your finances. For example, did you have any missed payments or defaults? By knowing these details, the car finance company can better assess whether they’ll grant you financing or not.
As this is an important part of the process, it would benefit you if you find out what your credit score is first. Knowing your credit score will allow you to get an idea of your chances of getting car financing. If you have a bad credit score, your application might be rejected. Or if the lender grants you a car loan, the interest rates might be too high since you’re seen as high risk.
What to Do If My Application is Rejected?
One thing to keep in mind if your car finance application is rejected is to not apply for another one immediately. The credit checks that lenders carry out leave a record in your credit history. Too many credit checks will negatively impact your credit score. It will just make applying for car finance more difficult for you.
What you can do instead is find out why your application got rejected. If it was because of inaccuracies in the information you provided, then you need to be more careful on your next try. Re-check the documents more than twice and take your time when preparing them.
If your application was turned down because of a low credit score or bad credit history, give yourself time to work on it. Improve your credit score by paying off your outstanding loans. Develop a good repayment record by paying your bills and loans on time. Try to automate the payments by linking them to your debit account.
It may take a while for your credit score to improve, but it will help you in getting the best car finance deals with good interest rates.
By knowing the car finance validation process, you’ll be more prepared to apply for car financing. Before you submit your application, re-check your documents and other important pieces of information you’ll provide the car finance company.
Ready to get car financing? Download Carmoola to see if you can get financing with us and how much you can get to buy your new car! It takes only a few minutes to know the results. For any questions, don’t hesitate to reach out to us. We’d love to talk to you! 😀