What Checks Are Done for Car Finance?

Applying for car finance can feel like stepping into unknown territory, especially when it comes to understanding the checks that come with it.

Whether you're dreaming of a sleek hatchback or a rugged SUV – there’s a few checks you’ll have to pass to get that loan you need.

From credit assessments to income verifications, this guide will walk you through the key checks taken by lenders.

Let us help you clear up any mystery surrounding the process and steer you towards a clearer path in securing that car finance deal you have your eye on.

Got a specific question? Why not jump to:

What checks are done as part of the application process?

When you're ready to get car finance, there are a few key things lenders look at to make sure everything's in order.

Think of it as them doing their homework to ensure you're a reliable person that can comfortably repay the loan.

They'll want to know:

  • Who you are
  • Where you live
  • How much you earn
  • Where you work
  • That you're legally allowed to drive

Let's break down each of these checks to give you a clear picture of what to expect and how to prepare.

Proof of identity

Proving who you are is crucial. Lenders want to make sure you are who you say you are to prevent fraudulent applications.

This usually means providing a form of government-issued ID, like a passport or national identity card. It's the first step in building trust with your lender.

Proof of address

Next, lenders will ask for proof of where you live. This could be a recent utility bill or bank statement with your name and address clearly shown.

Income proof

To ensure you have the means to make your car loan payments, lenders will ask for evidence of your income.

Pay slips, bank statements, or tax returns can all serve this purpose, helping to show you’re capable of paying back what you borrow. Some lenders can connect directly to your accounts to help verify this securely and automatically.

Employment history

A steady job history suggests stability and a regular income, making you a more appealing candidate for finance.

Lenders may ask for details about your current and past employers to gauge your employment stability and income consistency over time.

Driver’s Licence

Finally, a valid driver's licence not only proves that you're legally allowed to drive, but also further confirms your identity.

Collectively, these checks are designed to provide lenders with a comprehensive view of your financial and personal circumstances.

Getting your documents ready in advance can speed up the process, putting you one step closer to securing the keys to your new set of wheels.

More credit guides

What credit checks are done as part of the car finance process?

You’ll find that credit checks are a crucial part of the car finance application process. Lenders use these checks to shine a light on your credit history and see how well you handle money.

There are two main types of credit checks you may encounter: soft and hard checks.

Understanding the difference between them can help you navigate the car finance journey with more confidence.

Let's explore what each of these checks entails, what they can potentially impact and what they mean for you:

Soft credit check

A soft credit check provides lenders with a quick glimpse into your credit history without leaving a mark.

Lenders use it to get a preliminary look at your credit score, which helps them decide if you're likely to qualify for finance.

This type of check doesn't affect your credit score, so you can breathe easy. It's a low-key way for lenders to check you out without impacting your score.

Hard credit check

A hard credit check is more in-depth, offering lenders a comprehensive view of your credit history. This is the check that comes into play once you submit a formal application for car finance.

Unlike its softer counterpart, a hard check will leave a mark on your credit report, and it can slightly lower your score for a short period.

But don't let that deter you - it's a standard step in securing finance and won’t take you long to get your score back to where it was.

If you’re curious about your credit score and want to check it out before applying you can check it for free to see where you stand before committing.

How long do credit checks take?

When you're on the edge of your seat, waiting to see if you can finance your dream car, the clock seems to go a little slower.

So, how long does it take for those all-important credit checks to come through? 
The good news is, it's quicker than you might think.

Credit checks, both soft and hard, are speedy processes, often completed within seconds or minutes when done online.

The magic of modern technology means these checks can be completed almost instantly.

However, the overall approval process for car finance may take a bit longer. Lenders need to compile and review all the necessary details before giving the green light.

At Carmoola, we offer a fast, convenient application process that takes place directly in our app. We’ll never leave you hanging waiting for a decision. 

FAQs About Credit Checks and Scores:

What can I do if I’ve been refused car finance?

If you're turned down for car finance, don't lose heart. First, ask the lender for feedback to understand why. Then, take steps to improve your credit score or consider using a guarantor. Exploring lenders who specialise in bad-credit finance might also open up new options.

How do car finance lenders check my employment history?

Car finance lenders may verify your employment to ensure you have a steady income. This could be through a recent payslip, bank statements, or sometimes, by contacting your employer directly with your permission.

What happens after car finance is approved?

Once your car finance is approved, you'll usually receive an agreement to sign and return. After all the paperwork is in order, the funds are typically sent directly to the car dealer, and you can pick up your new car. However, with Carmoola the process is more straightforward. There’s no paperwork and no phone calls. Just apply via our app and we’ll give you the funds in a virtual card that can be used at any approved dealership.

Do car finance companies contact your employer?

Yes, some car finance companies may contact your employer as part of their checks. This is to verify your employment status and income details you've provided. They should ask for your permission before doing so.