Is it hard to get accepted for car finance?

Are you eyeing that dream car but wondering whether you'll be accepted for car finance? It's a common concern for many prospective car buyers, and we’re often asked whether it’s hard to get accepted for car finance. We’ve got all the most commonly-asked questions covered right here, which should help to ease those worries and get you on the road with confidence.

So let’s start with the biggest question of all:

Is it hard to get accepted for car finance?

Typically no, but the difficulty of securing car finance can vary depending on each person’s individual circumstances. While some may find it relatively straightforward to apply and get accepted for car finance, others might face challenges based on things like their credit history, income stability, and the lender's criteria. If you’re not sure how your current financial situation stands, or how it could affect your chances of getting accepted, you can ask for help and advice from a financial advisor or speak to a lender directly to find out what they look for in a successful loan application.

What documents do I need for car finance?

When applying for car finance, you'll usually be asked to provide the following documents:

• Proof of identity: This could include a valid passport, driving licence, or a government-issued ID card.

• Proof of address: Documents like utility bills or bank statements dated within the last three months can serve as proof of your current address.

• Proof of income: Recent payslips or bank statements can prove your income stability, which shows you are able to repay the loan.

• Employment details: Lenders may require information about your employment status, including your employer's contact details and how long you’ve worked there

• Address history: Lenders sometimes need to know where you have lived for the past three years.

What details do you need to apply for car finance?

To streamline the application process, you'll be asked to provide various details, including:

• Personal information: This includes your full name, date of birth, current address, and contact details.

• Employment details: Information about your employment status, including your job title, employer's name, and duration of employment.

• Financial information: Details about your income, expenses, and any existing financial commitments.

What checks are done for car finance in the UK?

Lenders in the UK conduct thorough checks when assessing car finance applications. These typically include:

• Credit history: Lenders review your credit report to evaluate your past credit behaviour, including any outstanding debts, missed payments, or defaults.

• Affordability assessment: This involves analysing your income, expenses, and existing financial commitments to ensure you can comfortably afford the loan repayments.

• Identity verification: You'll need to provide valid identification documents, such as a passport or driving licence, along with utility bills to prove your identity and your address.

What ID is required for car finance?

Valid forms of identification are essential for car finance applications and lenders will always ask for it in some form. Accepted forms of ID typically include:

• Passport

• Driving licence

• Government-issued ID card

Do you need to show payslips for car finance?

Yes, providing payslips is often necessary as they help lenders make sure you have a stable income. This in turn helps them decide whether or not you will be able to afford and keep up with the loan repayments for your car finance agreement. If you don’t have payslips, showing your last three months of bank statements showing your regular income being paid in is usually an acceptable alternative for lenders.

How many payslips do I need for car finance?

The number of payslips you’ll need to show lenders when you apply for car finance may vary from lender to lender,, but typically you'll need to provide at least two to three recent payslips to demonstrate your income stability. Lenders often ask to see bank statements or payslips from the three most recent paydays.

What credit score do I need for car finance?

While there's no specific credit score required for car finance, a good to excellent credit score generally improves your chances of approval. However, some lenders offer bad credit car finance options for people with lower credit scores, though these often come with higher interest rates due to the higher risk of lending.

Can you get rejected for car finance?

Yes, you can be turned down for car finance for a few reasons. If you've missed payments before or have a history of money troubles, lenders might see you as too risky. Also, if you don't earn enough money or your job isn't stable, they might worry you can't pay back the loan. And if you give wrong or incomplete info on your application, that could also get you rejected. Making too many credit applications in a short time can be a red flag for lenders, too. Each lender has its rules, so even if you're okay for one, another might say no. Understanding these reasons can help you get ready and improve your chances.

How likely are you to be accepted for car finance?

Your likelihood of getting approved for car finance depends on various things like your credit history, income stability, job status, and the specific requirements of the lender you're applying to. If you have a good credit history, steady income, and a stable job, your chances of approval are higher. However, if you've had money problems in the past, your income isn't enough to cover the loan, your job situation is uncertain or you have a poorer credit score, you might face more challenges.

Why am I not eligible for car finance?

You might not be eligible for car finance for several reasons. If you've had trouble managing money in the past, like missing payments or having debts, lenders might see you as a risk and say no. Also, if your income isn't high enough or your job isn't secure, they might worry you won't be able to afford the monthly payments. Sometimes, it's about the specific rules of the lender you're applying to — if you don't meet their criteria, they might turn you down even if you're okay for another lender. 

What stops me from getting finance?

Issues such as a low credit score, outstanding debts, irregular income, or a history of missed payments can hinder your chances of securing car finance. If you have been refused car finance or if you think your current financial situation might stop you from getting accepted, it’s a good idea to seek help from a financial advisor before you apply, as they can help you identify what’s blocking you and give you advice on how to fix them.

What happens if you get declined for finance?

Being refused car finance can happen for various reasons, like having a low credit score or not meeting their income requirements. When you're declined, the lender will usually send you a letter or email explaining why. You might need to work on improving your credit score or saving up more money for a bigger deposit, or you could also consider applying to a different lender or exploring alternative financing options like a personal loan. Whatever you decide, don't lose hope—being declined for finance doesn't mean you can't get a car, but it might mean you need to adjust your plans or approach.

How do I know if my car finance has been accepted?

Once your car finance application is approved, the lender will notify you either by letter, email or phone call. Once this happens, you will then be able to go ahead with the next steps, such as signing the agreement and arranging the purchase of the vehicle.

Does everyone get pre-approved for car finance?

Sadly no, not everyone gets pre-approved for car finance. Pre-approval depends on factors like your credit history, income, and the specific policies of the lender you're applying to. If you have a good credit score and a stable income, you're more likely to get pre-approved. However, if you have a history of missed payments, a poor credit score or your income isn't enough to cover the loan, you might not get pre-approved. Even if you're not pre-approved, you can still apply for car finance—you'll just need to go through the regular application process, and the lender will assess your application based on your financial situation.

Is car finance a soft credit check?

Initially, car finance applications may involve a soft credit check, which doesn't impact your credit score. However, a hard credit check is typically performed before final approval, which may affect your credit score temporarily.

Why would I be refused credit if my credit score is excellent?

Even if your credit score is excellent, you could still be refused credit for several reasons. While your credit score is an important factor, lenders also look at other aspects of your financial situation. For example, if you have a high level of existing debt relative to your income, lenders may worry that you won't be able to handle additional debt responsibly. Recent credit applications or inquiries on your credit report could also raise concerns about your financial stability, even with an excellent score.

Does declined finance affect credit score?

No, getting a finance application declined doesn't directly impact your credit score, as lenders don’t record whether you get approved or declined. However, the process of applying for finance involves a hard check on your credit report, which can temporarily lower your score by a few points. Multiple credit applications within a short period of time could signal financial instability to future lenders and may negatively impact your credit score. It’s therefore important to be cautious about making multiple applications, especially if you've already been declined elsewhere.

So is it hard to get car finance? The answer is typically no, many people find it fairly straightforward to get car finance. Ultimately it all comes down to your own personal financial situation, your credit score and how clear it is for lenders that you’ll be able to afford the loan.