5 Top Tips To Prepare For A Car Loan Application

Sharing is caring!

Taking out a car loan is a smart way to pay for a car in monthly instalments. The cost of second-hand cars is at a high and many drivers can’t afford to pay for a vehicle in one go. This has led to the popularity of finance being on the rise. Finance allows you to borrow money from a lender to get a car and pay for it over a term that suits you! Car loans are pretty straightforward but it’s worth remembering that you will need to meet the lenders criteria first before you can be accepted for finance. The guide below looks at the top ways in which you can put your best foot forward and prepare for a finance application.

1. Set Your Budget

Your financial budget is really important as it can determine whether you can actually afford to finance a car and then shop for cars within your budget. Your budget for a car should not leave you struggling each month and as a common rule, you should only use around 10% of your total monthly income on car finance. Assess your current finances and see how much you could comfortably put towards your finance payments each month and set this as your budget. Once you apply for finance, you may find that some lenders also put a minimum income required in place which you will have to meet first before you can get approved.

2.  Check Your Credit Report

Finance lenders want to know if they’re going to get their loan back on time and they can do this by running a credit check on you when you apply. Before you make an application, you should check your credit report and see where you fall on the credit scale. It can be harder to get approved for car finance with bad credit as you’ve probably had problems in the past with sticking to the terms of finance agreements, have high levels of debt or have never borrowed before. This increases the risk to the lender, and they may decline you. You should make sure your credit score is in the best possible position to help you get a better interest rate.

car loan application

3. Work Out Your Car Requirements

Once you’ve set your budget and raised your credit score, it’s time to find the car you want. Car finance deals in the UK can last for a number of years so it’s important that the car you buy is fit for purpose for the full duration. Set out your requirements first and consider, how many seats you need, how much space is required, which fuel type will suit you best and think your day to day driving style such as how far you drive and the type of roads you drive on.

4. Consider The Finance First Approach

Once you’re ready to choose your car, you may head straight to your local dealer to help sort your finance. However, car dealers may only work with a few finance lenders which may not be getting you the best deal possible. Using a broker for cars instead and sorting your finance first can be more beneficial. Online car finance brokers work on your behalf to match you with the best finance package for your situation. They work with multiple lenders and can find you the lowest APR in an instant. You then have the freedom to choose a car within your budget from any reputable dealership. Choosing to finance first can save you time and money and is becoming increasingly popular amongst drivers.

5. Get All Your Documents Together

When you receive an approval or finance from a lender, you will need to supply a few supporting documents to prove your worthiness. Lenders also want to reduce the risk of any fraudulent applications so will require you to proof of your identity and income. Lenders may ask for a photocopy of your driving licence to prove you are who you say you are and also that you are qualified to drive in the UK. Your income can be verified by supplying 3 months’ worth of bank statements or pay slips. They any also ask for other documents such as a utility bill in your name to verify your living address as it’s important that they know where the car will be kept, supposing you were to break the rules of the agreement and they need to collect the car.

Sharing is caring!

Speak Your Mind