Not sure if you would qualify for getting approved for car finance? 🤔 Let us advise you. Buying a vehicle with car finance is becoming increasingly popular in the UK and some dealerships are providing affordable plans that come with manufacturer incentives. These provisions make the car financing application process straightforward for most people, so don't assume you might not be eligible.
Of course, the lender has to carry out some specific checks before approving your application. So let's think about what documentation you might need. Having a knowledge of these requirements and preparing in advance will help you get your car finance application processed quickly.
Also, whilst having an excellent credit rating is a big plus, it's not always essential. Although it may affect the interest rates on offer. And there are of course other aspects that lenders check. So what's the criteria for receiving this type of finance, and who can get car finance? Let's examine this further.
Who Is Eligible For Car Finance?
Here are the factors that determine if you are eligible for car finance options in the UK.
For most lenders in the UK, a buyer needs to have been a UK resident for more than three years.
The age restrictions for anyone applying for car finance is 18 to 75 years. You will need to meet this criterion to be approved.
When applying for finance, the vehicle should usually be less than eight years old at the contract's beginning. An option if the car is older might be a personal loan from your bank or other institution if you qualify as this is unconnected to the car itself.
Your credit score impacts whether you get car finance or not and the rate of interest offered. A strong rating is attractive to lenders and so will get you the best interest rates.
You will of course need to be able to afford the repayments and be able to show that to the lender. We cover this aspect in some of our other blogs.
What Are The Requirements For Car Finance In The UK?
When applying for car finance plans, the lender will require you to provide some information to prove your identity. As a part of the application, they have to carry out a hard credit check to confirm your reliability to pay back the loan.
Here are the documents needed to buy a car on finance.
Proof Of Identity & Personal Information
You will need to provide the details of your full name; this includes the previous one if you have changed it. Also, you should submit details of your date of birth, marital status, residential status, and address for the past three years.
You can use any government-issued ID, but the requirements vary with different lenders. You can also use your passport as proof of identity.
A valid driver's licence is a crucial requirement for car finance in the UK. It also acts as proof of identity and boosts your chances of getting car finance approval. If your license is outdated, do contact the DVLA to update it before going ahead with the application.
Proof Of Income And Employment
Lenders will ask for information about your sources of income and employers for the past three years. This information acts as proof that you can afford to make the monthly payments. Furthermore, they could ask for bank statements or payslips for the past three months to show regular income.
If you are not able to get hold of the payslips, they could make a quick confirmation call with your employer to confirm that you work there. If you are self-employed, bank and account statements could act as proof of a regular income.
The lender will analyse your income and expenses to determine whether you have any money left to pay back the monthly instalments. If they determine, the cash is not enough; your application may be rejected. You can talk to the lender in advance to know which documents are required for car finance.
To qualify for car finance, you will need to provide your bank details. This information includes your account name and number, sort code and bank address where the monthly payments will come from. For the application to go through, the account should be in your name and in your possession for the past three years.
Proof Of Address
For traceability purposes, a lender will require information on your address history for the past three years. You can provide utility bills in your name to prove your residence history.
If you just moved to the UK recently, some lenders might carry out an overseas check to confirm the information provided. If your address history is sketchy, there may be concerns that can make the application process more challenging.
Before you apply for car finance, you can check your credit history using reference bureaux. That will give you chance to reveal and resolve any issues before you apply. Once you approach a lender, they will also carry out a credit check to confirm the information you have provided and check your credit rating.
A finance company will use credit agencies to confirm your financial history and current situation. This process also helps determines your ability to pay back the loan.
To avoid car finance rejection, it's best to check your rating in advance and make improvements if you can. You can better your credit situation by catching up with past payments and paying off your credit cards.
What Can Get You Declined For Car Finance?
If all your documentation is in order, your car finance application can usually be approved in 1-2 days. However, you can get declined by the lender if you don't meet all the requirements.
Every lender has a system. Their set of rules and regulations determine who can get finance. Therefore, if you don't qualify for one, you can always approach a different lender. But be wary of making too many applications that might be declined, as this will negatively affect your credit rating.
Having invalid documents could also get you declined. All documentation acts as or contributes to your proof of income, and shows that you can afford and are eligible for the loan. Therefore, you should submit documents that are in your name, and contain correct and up to date information, in order to make the application process quick and seamless.
The most critical thing when applying for car finance is honesty. Once you lie on your application, you have committed fraud which is a criminal offence.
This could land you in trouble with the lender and the law. The lender will decline your application, and you could be blacklisted, which makes it hard for you to borrow money from a reputable lender in the future.
So, think you might be eligible for help with buying your new car? Know that getting car finance is usually a straightforward process, as long as your application is in order. Finding out what is needed for a loan application in advance will make the process easier. But remember, if there is missing information, the lender could request more details, or worse, decline your car finance application.
The rules that govern who can get car finance are not complicated. But if you need further advice we are here to help. Once you've got your information ready, you can contact us here at Carmoola and we will let you know within minutes if we can help you spread the cost of your purchase. Our process is really easy, quick and painless, with just a few details and a quick selfie then you're on your way to owning your dream car! 🚙