Is It Easy To Get Car Finance?
Are you longing for a whiff of that brand new car scent? Eager to get your hands on a crisp new steering wheel? Yeah, we get you - buying a new car can feel so freeing! And if you’re anything like 90% of car buyers in the UK, you’ll probably want to get car finance in order to buy your next car. Car finance spreads out the cost of the vehicle over a certain amount of months so that you don’t have to cash it all out in one go. 👍
But how easy is it to get car finance? If you’ve never applied for a car loan before, you might feel somewhat overwhelmed by the process, and you may find yourself wondering if it is as hard as it seems. Well, worry not: applying for car finance is actually a pretty straightforward process. That is if you have the right information and tools on hand, of course. So, without further ado, let’s talk about whether or not it is easy to get car finance and how you can overcome any challenges! 😎
How Easy Is It to Get Car Finance UK?
If you were to go around asking car finance users whether or not they found it hard to get a car loan, you’ll find that answers will differ greatly from one person to the next. That’s because car finance is truly dependent on personal circumstances - lenders look at finance applications on a profoundly case-by-case basis. You’ll find it much easier to get accepted for car finance if you have one or more of the following:
- No debt or very little debt
- A stable source of income
- A good salary
- A good credit score
Why It Might Be Hard for You to Get Car Finance
You won’t be able to assess how easy car finance will be for you before you find out what lenders look out for. Once you send off your loan application to your car finance provider, they will start the examination of different factors.
Car Finance Considerations
First of all, they will be looking at how old you are. You’ll have to be over 18 to take out car finance. You can read our guide to car finance age limits if you’ve got questions about that. You’ll also need to be a UK resident to apply for car finance, so lenders will be looking at whether or not you have a British address. In most cases, you’ll also need a valid driving licence to take out car finance.
Lastly, the car finance provider will try and find out your level of affordability which means how likely you are to be able to pay the loan back each month. They’ll look at how stable your source of income is, and how much you earn monthly. They’ll also examine your credit score to see if you have any other credit commitments that may burden you throughout the course of your car loan.
So, if you’re wondering how easy is car finance to get, you’ll have to take a look at your personal circumstances and figure out if there’s anything you should work on before applying. Let’s look at some of those circumstances in more detail.
The Documents You'll Need for Car Finance
Proof of ID
Car finance companies will need to check you are really who you say you are. They will request personal information such as full names, marital status, date of birth, and residential status. They will also ask for a recognised form of ID like a passport or driving licence.
Proof of Address
A critical requirement for car finance in the UK is also proof of address. You usually must have been a resident of the country for more than three years to get the loan approval. although some companies might consider a shorter period. You must give the correct address and residential history if you moved around a lot. Utility bills that are in your name act as your proof of residence. Inaccurate or inconsistent address details could mean that your application will be denied, so make sure everything is correct before you send it off.
Proof of Employment
For credibility purposes, car finance providers will ask you for your employment details. You will need to provide information about your job title and salary. If you are self-employed, you can show bank statements, and maybe your SA302 which you can get from HMRC as proof of taxable income. Here at Carmoola, we perform an affordability assessment for your online, so you will not need to provide payslips, but some companies will need either 3 or 6 months of payslips.
Car finance agreements require borrowers to make monthly payments. These charges get deducted from your bank account. Therefore, the lender expects you to give your bank account details such as account number and branch address, or details of a debit card for your repayments. They may ask permission to perform and open banking check, so that can see everything is as it should be and you can afford the repayments for your loan.
Without a valid driving licence, most financial lenders will deny your car finance application. When applying, you will usually need to show proof that you have a legal right to drive. Providing this contributes to higher chances of loan approval.
The Factors that Affect your Car Finance Application
Your Credit Score
Before approaching a car finance provider for your next car, it's advisable to have a credit check done independently so you can see your score. You can use free services from companies like Experian and Clearscore to determine your credit rating.
Checking your credit score is a great idea because you can identify any inaccuracies that need correction. Furthermore, you can find out how to improve your chances of loan approval.
Being aware of your credit score also gives you an idea of what interest rate a lender might offer you. The better your rating, the better the deal you could secure. If your credit score is poor and there's no way to improve it, you can approach lenders who specialise in poor credit car finance. Sometimes it is useful to approach a broker to help with this.
The fastest way to get rejected for car finance is if you can't realistically afford it. As the car finance company reviews your credit history, they will be able to see how much you can afford to pay. That's why it's really important to plan in advance to figure out how much you can afford to spend on the loan and still meet your other monthly expenses. You can use our free car finance calculator if you need some help - just play around with the different factors until you get your perfect loan.
By the way, don't forget to include the deposit you need to put down for your financed car in your budget. It usually amounts up to 10% of the car's sale value, so it would be an unfortunate amount to miss when planning!
The Car Finance Agreement Type
Your experience with car finance will vary depending on which type of agreement you go for. Cheap, easy car finance sounds like a dream but you'll only be able to get there if you go for the right deal. Before you go any further, decide if you want to go for a personal loan, hire purchase, or a PCP deal. Each financing option has different loan terms; so it's important to research all options properly beforehand.
Every lender is different and has a unique set of terms and requirements. If one car finance provider rejects your application, another one might accept it. However, be careful that you don't make too many applications within a short period of time, because it could damage your credit score.
You can always check out Carmoola for great car finance deals. By simply downloading Carmoola on your smartphone, you can apply online. It's a quick and simple process, and once you are approved you get a gorgeous virtual Carmoola card, and the freedom to pay for your car purchase at any reputable dealership. Yay, you're on your way! 😊 🚘