Will I be able to get a car loan?
Before they decide whether or not to lend you thousands of dollars to buy a car, a lender will evaluate your application to assess whether you CAN and ARE LIKELY to repay your loan.
- The ‘can’ comes down to your ‘capacity’ – do you have a regular income, and how much is left over each month after you cover all your existing costs and expenses? It really doesn’t matter how great your credit rating is, or if you’re offering security for the loan, if you can’t show you can afford to make regular repayments. Unfortunately, this can make things tricky for people who are self-employed, work casual shifts, or have recently changed jobs. If you’re in this situation you might still be able to find a lender who is willing to work with you, but you’ll probably have to jump through a few more hoops to convince them you can service the loan – and pay more interest to compensate for the extra risk.
- Credit rating. This is a record of your financial history. Surprisingly, having never borrowed before can work against you, as lenders prefer to see proof of regular, on-time payments. Any black marks on your record (missed payments, defaults on previous loans and even too many credit checks by other lenders) can lower your rating and make it hard to get a loan. A credit rating doesn’t necessarily mean you won’t be able to get car finance – some lenders specialise in these high-risk loans – but you can expect to pay much higher interest to compensate them for the additional risk.
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Find your ratesHow can I apply for motor finance?
As with everything else, this depends on what type of finance you choose and where you look for a lender.
If you approach a high-street bank for a personal loan or to redraw on your mortgage, you’ll have to go through their application process, which may be slower and more cumbersome than most online lenders.
If you choose to work with a broker, they may take care of all the application process for you once you share your financial information. This can make the process easier, but not necessarily quicker. A car dealer might do the same if you opt for a car loan, hire purchase, or a car lease through their in-house finance partner.
If you choose an online lender for your motor finance – for a car loan or secured personal loan – you can expect a quick and simple online application process. You’ll start by filling out basic details about how much you want to borrow, then upload documents so they can assess your application. These will include
- Proof of identity
- Payslips or other proof of your income
- Bank statements to show your regular income and expenses
- Copies of the agreements for any other loans or debt you have
- A valuation of the vehicle you want to buy (for a secured car loan)
Once they have all your documents the lender will check your credit rating and evaluate your application. This is usually very quick, so you can expect to have a response within about 24 hours or less, and you could have the funds available within hours after your application is approved.
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