Car financing is one of the best ways to get a car and pay for it over a term that suits your budget. Finance makes getting a car more accessible to many drivers, and it’s increasingly becoming the main funding option for most people. If you’ve not had a car on finance before, you may be wondering what your chances of approval are. Before you can get financing, you need to ask the lender if they would consider offering you a deal. To make their decision, they will look at several factors, so knowing what to look out for and what affects the likelihood of approval can be good. This guide looks at the top car finance needs you should look into before you even start making applications.
Save for a deposit.
Some car finance agreements may require a deposit of around 10% of the value of your chosen car, so it’s worth being prepared for. While you can get many finance deals with no deposit to pay, a large deposit can help reduce your loan amount and make your monthly payments smaller.
Check your credit score.
Most lenders will require you to undergo a credit check when you apply to see how likely you are to pay your finances back on time. Get ahead of the game and get into the habit of checking your credit score regularly. Understanding the factors that affect your credit score can be key to improving your likelihood of getting a car on finance.
Improve your credit if you need to.
If you check your credit and realise it needs some work, it can be a good idea to take some time to improve your credit situation before you make finance applications. It can be harder for people with bad credit to get approved because they are usually a higher risk to lenders. A low credit score could be due to missed or late payments, high levels of debt, or defaults on your accounts which may put lenders off. They could even decline your application based on a low credit rating.
Set a budget.
Car finance means you will pay back the lender over an agreed-upon term in monthly instalments. Using a car loan calculator can help you see how much you could borrow based on your budget. Your monthly budget should be affordable and should not change shortly, as not being able to keep up with your payments can have serious financial implications.
Find the right agreement for you.
Many drivers assume car finance is a one-size-fits-all agreement. However, there can be multiple agreements to choose from and depending on what you want from your finances, you may be better suited to one over the others. Have a look into popular agreements like PCP, Hire Purchase, and Personal Loans and decide which may be the best route to take.
Get a free quote.
When considering the best place to get a car on finance, you could look at free finance quotes, which help give you an idea of approval rates and how much you could borrow. This can help you save time, protect your credit, and save you money! Look out for lenders who are offering low-interest rates to make your finances cheaper and pay less back overall. Don’t jump at the first approval you’re offered, as it may not be the best deal you could be getting.
Value your part exchange.
If you have a car already, you can sue the value of your car towards a car on finance. It works just like a deposit and means you don’t have to spend time finding a buyer for your old car. You can hand the car to the dealer and use it to reduce your loan. It can be worth valuing the car privately and getting an idea of how much it’s worth, though, to make sure dealers aren’t giving you a reduced price.