Car finance has been increasing in popularity year after year as a number of people look to get their next vehicle on credit. You can benefit from spreading the cost of a car over a few years in manageable instalments. There are many types of car finance though and it can be a minefield of legal jargon designed to confuse you. However, it can and should be really simple. This quick guide is designed to help you get the very best tips to secure your next car on finance.
Tip 1 – Find out what your credit report says
If you want car finance the majority of your prospective lenders will look at your credit history to see how good or bad you have been at repaying previous credit. As a result, you need to know what your credit score says about you. You can check your chances of being approved for car finance and your expected interest rate with the car finance calculator from UK Car Finance.
Tip 2 – Only apply where you think you have a good chance of being approved
This is a difficult one, we know. But you want to decrease your chances of getting declined as much as possible and simply applying everywhere will significantly harm your chances if you get declined. Multiple applications for credit can look like you’re desperate to lenders which draws concerns over your affordability. So where do you go? If you have a poor credit score you want to use a bad credit car finance expert who has specialist lenders designed to help you. If you don’t have a deposit then you want to look for a car finance broker who has no deposit options.
Tip 3 – Improve your credit situation
If you’ve found that you have a somewhat less desirable credit report then you want to seek to improve it. After all, regardless of your actual credit score, a credit report on the way up is more desirable than one on the way back. Some great ways to improve your credit score is:
- Sign up to the electoral role
- Ensure all details are correct and report and issues on your credit file
- Pay all your credit in full on time every month
- Get rid of any unused or unwanted credit cards
- Don’t apply for multiple credit
Tip 4 – Affordability is the most important factor
Affordability has and always will be the most important factor by car finance lenders. If you can’t afford the monthly payments on a car you will never been approved for it. This doesn’t mean you can’t need to be earning thousands a month though. There are now brokers that specialise in car finance on benefits so if you’re unemployed don’t automatically presume you are unable to buy a car on finance.
As a general rule you will need about £1,000 in eligible income a month to be approved for finance, depending on many other factors such as your credit history and the type of car you want, this may be reduced or increased slightly.
Tip 5 – If you have CCJ’s wait for them to drop off your credit file
County Court Judgements are not seen very favourably by a lot of car finance lenders. If you have one or more it’s best to wait 12 months until they begin to fall off of your credit file again.