What is the approval process of getting car finance?
Getting finance for your new car purchase can be a daunting prospect. Especially if you are unsure if you will be accepted. Take the worry out of getting approved. In this guide, we will take you through the entire process of getting approved for car finance.
Before you apply
Before you apply for car finance you should check your credit score. Some of the cheaper deals are only available to people with excellent credit ratings. If you don’t fall into that category then you can still obtain credit, but you may have to pay more. Checking your credit report for any errors will ensure you aren’t forced into a more expensive deal or denied credit altogether because of an incorrect entry on your report.
If your credit score isn’t in the green then you may feel disheartened about applying for car finance. While having a good credit score is the easiest way to obtain finance it’s not the only way. So don’t worry, you may still be accepted. Some brokers have access to specialist funders who work solely with people who have poor and average credit. The monthly fee will be higher because you would be considered a higher risk. But if you maintain your payments throughout your contract then your credit score will improve.
The minimum requirement for obtaining car finance is employment or a regular independent income. If you are employed, either full time or part time you have a greater chance of being accepted for a finance deal. If you are on benefits to supplement your income you still have a good chance of obtaining car finance. Essentially, your finance provider must know that you are able to meet your monthly payments. This is why they are more confident lending to people who are employed or who have a good credit score.
Understand your options
There are different types of finance available. So understanding your options and choosing a method that best suits your needs is key to a happy car loan. Most private car buyers will purchase a car using HP (hire purchase), or PCP (personal contract purchase). These videos highlight the differences between HP and PCP.
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Don’t falsify your application
If you have a lower credit score or you aren’t employed, you might be tempted to make false claims on your application. This isn’t a wise move. A false application can easily be spotted and you’ll risk being blacklisted from applying for car credit for a number of years.
Instead, you could also consider a guarantor. A guarantor is someone who signs to say that should you be unable to meet your payments, they will cover the cost on your behalf. A guarantor needs to be over 21 years of age and have a good credit history themselves. It’s a big ask as they will ultimately be responsible for satisfying your finance agreement should you be unable to pay.
Speak to your broker or dealership
Discussing your requirements with your broker or dealership has some significant benefits. They should have expert knowledge on the finance options available and will be able to pre-empt any hurdles you are likely to face. They will also understand the financier’s lending guidelines and ensure that your income and expenses are all entered correctly.Unfortunately, not all dealers or brokers do have expert knowledge. So if you do not feel 100% confident about who you are talking to try someone else. You don’t want to have a search done because someone says “let’s just give it a go” and they have not asked you about your credit history.
Complete your application for finance
Be sure to read all of the paperwork for your car finance application thoroughly. If you don’t understand something then always ask your dealer or broker. Their trained staff are there to support you through your purchase. It’s their job, so don’t feel embarrassed. The application process is all about correctly collating all your information and accurately placing it into your application. This means using correct income and expenses, correct time frames at residences and best-estimated values of assets and liabilities. These are all quite easily verifiable if required by the lender and if you are way out, this could raise suspicion and ultimately result in a decline of finance.
The application process is all about correctly collating all your information and accurately placing it into your application. This means using correct income and expenses, correct time frames at residences and best-estimated values of assets and liabilities. These are all quite easily verifiable if required by the lender and if you are way out, this could raise suspicion and ultimately result in a decline of finance.
Sign the dotted line! But don’t worry, just because you’ve signed to apply, it doesn’t mean you must accept any offer of credit that is returned for you. Even if you did accept a credit agreement you will still usually have a 14-day cooling-off period in which to change your mind.*If it is a regulated agreement.
Then what happens?
Once the lender has received your application their team of analysts will review your information. If you supplied any supporting documentation such as pay slips for proof of income then these will also be reviewed. Should you have a less than perfect credit score they may come back and ask for further information.
Depending on the outcome of this contact and once the analyst has completed their checks and verifications you will be notified. This contact will be one of four eventualities. Either, an acceptance. A rejection. An acceptance with conditions, or a request for further information.
What is the difference between each outcome?
An acceptance is a holy grail and then it is full steam ahead towards obtaining your vehicle. A rejection is of course not the news you were hoping for. If you receive a rejection your broker or dealership will discuss your other options with you. This can include re-applying with another lender, or advice about securing a guarantor.
An acceptance with conditions essentially means that you have been accepted in principle but you may need to provide evidence of part of your application, agree to pay a higher initial payment or have some other restrictions may be applied.
A request for further information is often a positive sign. It means the lender is considering your application but is unable to find some necessary information in which to make their decision. If you are able to provide the right answers then you should quickly move to an acceptance.
Once you’ve accepted the offer of finance the loan contract will be drawn up. You will be given the opportunity to review the information in the contract and we recommend that you do. You must be satisfied that everything is correct and as discussed before you sign. The lender will also check that everything has been executed correctly and your contract will begin.
Congratulations, you’re now the proud owner of a new car. Driving a new car is a joy and be sure to shop around for the best finance deal. Speaking with an experienced broker can help ensure you get the best finance deal for your new car.
Faye is an experienced blogger with a keen eye for finding excellent information about the subjects she writes about. Giving OSV blog readers the most accurate knowledge.
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