If you’re looking to get a car on finance, you may have heard it’s harder to get approved when you have bad credit. Whether you’ve been refused car finance already or you’ve been rejected in the past, it can be disheartening. However, not all hope is lost! It’s worth remembering that car finance is never guaranteed to anyone and when you’re refused it can be for reasons as simple as not meeting the lenders criteria. But, with this in mind, how can you increase the chances of getting a car on finance? This blog has been designed to help you prepare your car finance application and advises on the steps you should take before you start applying for finance.
Why have you been refused car finance?
If you’ve already been refused car finance, don’t panic! However, it can be a good idea to stop applying for car finance until you’ve got all your ducks in a row. There are a number of reasons why car finance rejection may happen and most commonly, you may be declined if you have a poor credit score, don’t meet the income criteria, or aren’t currently employed. Whatever the reason you’re declined car finance, it doesn’t have to be the end of the road.
1. Work on your credit score
If you’ve been declined car finance due to poor credit, it can be worth taking some time to rectify this before you try again. The best way to start to rebuild credit is to manage your current financial commitments responsibly and make all payments on time and in full. Credit scores are all about future prediction and the likelihood of you being able to meet the terms of your deal. By showing evidence of being able to stay on top of your finances, you are increasing your credit score and improving the likelihood of getting a car finance approval.
2. Find a bad credit specialist
If you have bad credit or no credit history, you may not be suitable for mainstream lenders. Usually prime lender reserve their best rates for people with better credit scores and they can be offered a car finance deal more easily. Some lenders may only offer finance to applicants who are less of a risk to lend money too. If you’re struggling to get approved, it may be best to apply with a bad credit specialist lender instead or use a car finance broker. A car finance broker is the middleman between you and the lender, and they have access to some of the most trusted lenders in the UK. Brokers help you find the best car finance deal for your circumstances and help to save time. You can then use your finance deal at any FCA approved dealership in the UK.
3. Choose a cheaper car
From a lender’s perspective, car finance is all about risk. The risk a lender takes when they loan out money and the likelihood of them getting the money back. If you’ve missed payments in the past, then you’re more likely to do so again in future. This may put lenders off and you may not be suitable for new car finance. However, by choosing a cheaper car and getting a used car on finance instead, you could help to increase the likelihood of approval. This is because the loan amount will be smaller, so the level of risk is reduced.
4. Consider hire purchase
Hire purchase is a form of secured loan and can be more accessible for bad credit applicants. This is because the lender owns the car throughout the agreement, until all payments have been made on time and in full and once the small option to purchase fee has been paid. This means that if you fail to repay at any point in your agreement, the lender has the right to take the car off you. This shouldn’t be taken lightly though as missed payments can lead to more serious financial implications too.
5. Get a guarantor
A guarantor is when you ask a friend or family member to support your car finance application. If you’re struggling to get approved, lenders could offer you finance with a guarantor as it helps to reduce the risk. Essentially, the lender has two opportunities for the finance to be paid back as your guarantor will agree to meet the repayment if you fail to do so. It can be hard to find someone who will support your application if you’ve had trouble in the past with sticking to the terms of credit agreements. However, having a guarantor can increase your chances of approval.
