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This is a collaborative post.
If you’re looking to get a car on finance, you may not want to jump straight in at the deep end. Car finance is a legal agreement and failing to keep up with payments can have a serious impact on your financial life. There are so many benefits to getting a car through finance. From getting a newer and better car than you would with cash, to spreading the payments across a term that suits you, it’s no wonder that more people than ever are choosing to finance their next car. However, in order to get the best deal possible, there are a few factors to consider before you start applying.
Save for a deposit
Getting a car on finance with no deposit to pay upfront can be attractive. However, it’s worth saving some money towards your car finance before you start applying. If you need a car in a hurry, it may not be possible to have a deposit contribution, but it can help to make your deal more affordable. Your car finance is calculated based on how much you borrow from a lender. By putting more down at the start, you are reducing the overall loan amount which makes the loan smaller and more manageable. Monthly payments can then be less and can also help to lower your interest rate offered too.
Work out your budget
Before you get a car on finance, you will need to know how much you can afford to pay each month. Most lenders will perform an affordability check to see how much money you earn and how you’re going to pay your finance back. Your car finance budget should be realistic and affordable. If you spread yourself too thin and end up missing payments or making late repayments, the lender can take the car off you if it’s a secured loan and it seriously impact your credit score and the ability to borrow in the future.
Prove your earnings
When you get any form of finance or credit, you will be expected to show what money you earn and how much you can afford for car finance, no matter if you’re self-employed, part time full time or on benefits. If you’re full time employed, this can be the most favourable to lenders as they will usually request 3 months’ worth of bank statements to help show how much you can afford for finance. It can still be possible to get a car on benefit income too as this is usually a set amount received each month, but it can depend on if you meet the lenders minimum income criteria. It’s worth checking what different lenders require in order to get approved for finance before you start applying.
Increase your credit score
It can be hard to get a car finance without a credit checkas lenders use your previous borrowing history to determine the level of risk. If you’re missed payments in the past or made late repayments, lenders may think you are more likely to default on future payments too. It can be a good idea to increase your credit score or build a credit history before you start applying for finance to help prove your credit worthiness.
Find the right lender
It can be worth exploring different lenders to see which can be right for you. If you have bad credit, you may be better suited to a subprime lender who can help and offer affordable monthly payments. If you’re looking for the best car finance rates, banks and budlingsocieties can offer personal loans with some of the lowest finance rates around. Alternatively you could consider a car finance broker who works in your behalf to find you the right car finance package from some of the most trusted lenders in the UK.