There’s no better way to learn how to get approved for a car on finance than straight from the people who know best! A car finance broker works with multiple finance lenders at once and Refused Car Finance, a leading bad credit broker, are sharing their expert tips on how to get a car on finance when you’ve previously been declined. Car finance is never guaranteed to anyone and in some cases, you may just be applying with the wrong lenders. However, the guide below looks at the most common reasons why you may be declined for a car loan and how to overcome it.
Can anyone get approved for car finance?
Car finance is always subject to status, and you will need to meet the individual car finance lenders eligibility criteria before you can receive an approval for finance. It’s unethical of any car finance company to be offering guaranteed car finance to every applicant as they can never promise that, and car finance lenders should never lend to anyone who can’t afford to meet the repayment deadlines. To help prevent this, lenders put affordability and credit checks in place to see if you can afford to get a car on finance, meet the monthly payments and also assess the likelihood of paying your loan back on time and in full.
Why might you be declined car finance and how to avoid it?
If you need a car, it can be disheartening if you are refused car finance, but not all hope has to be lost! There are a few ways in which you could better your chances of approval depending on your current situation and why you’ve been refused.
- Low credit score.
A low credit score can be a red flag to finance lenders as it usually means you have had trouble making repayments in the past, have high levels of debt or no previous credit history. Lenders usually require you to pass a credit check when you apply for finance so they can assess the level of risk and the likelihood of you paying your loan back on time and in full. Lenders tend to prefer applicants who have a long history of handling credit responsibly, making payments on time and have a low credit utilisation ratio.
Expert tip: If you’re struggling to get approved due to bad credit, it can be a good idea to spend a few months working on improving your credit score or building a credit history before you start applying for finance. A better credit score can see easier acceptance rates and also lower your interest rate offered which makes car finance more affordable in the long run.
- No employment status.
If you currently don’t have a job, it can be very hard to get a car finance approval with no income. You can’t show lenders that you can afford a car on finance due to lack of income so you will be automatically declined. You may be in receipt of benefits or are looking to get car finance whilst retired and both could be possible if you can prove your income. Both benefit income and pension payments can be used as income as they will be a regular payment into your account each and every month.
Expert tip: If you are struggling to get approved due to no employment status, it may sound simple, but you could wait until you have a steady job before you start applying. If you have no job due to the inability to work, you can still get approved for finance with a specialist lender who deals in benefit income car finance and as long as you meet their minimum income required.
- You can’t afford a car on finance.
Sometimes you can be refused car finance due to the simple fact that you can’t afford to get a car. Each car finance lender has their own minimum income required and if you don’t meet the requirement, you could be automatically refused. Each lender is different so it can be worth checking their criteria first, but many lenders have a benchmark of around £1000 income per month.
Expert tip: If you can’t afford to get a car on finance right now, it can be better to wait until your wage increases or you could use any savings you have to put towards your car finance deposit. A deposit for car finance can reduce the loan amount and means you don’t have to pay as much back to the lender. In some cases, a deposit contribution could help you get approved for car finance.
- No license.
If you don’t have a valid UK license, you will be refused car finance. You can’t get a car on finance with no license because you wouldn’t be able to drive the car until you pass your test so it’s pointless. There can be options for provisional license holders to get a car on finance, but the likelihood of approval will increase massively once you have a full UK licence.
Expert tip: if you’re currently learning to drive with a provisional licence, it can be possible to get a car finance approval, but it can be best to wait until you pass your test before you apply. Once you’ve passed your driving test, you don’t even need to wait for your new licence with the DVLA to come through, you can apply straight away, and the lender can check your details with the DVLA online.
