Getting a car on finance can be a great way to help spread the cost of owning your next car. The majority of people in the UK choose to get their car through a form of car finance and it’s easy to see why. Car finance allows you to get a car, usually better than you would get with cash and split the cost into affordable monthly payments. There are a number of factors that finance lenders take into consideration before they approve you for finance. One thing that many lenders consider is your employment and affordability. People who have little or no income could be in receipt of benefits, part time workers or looking for car finance for students. If you have low or no income you may be wondering if it’s possible to get accepted for car finance. Remember car finance is never guaranteed but luckily, there are a number of ways in which you can help to increase your chances of being approved.
Improve your credit score
Having a better credit score can have a range of benefits on your financial life. Those with better credit scores tend to get access to the best rates and lower payments. This is because they are seen as less of a risk to the lender. Even if you have little income, you can boost your chances of approval by improving your credit score. You can help to improve your credit score by making all payments on time and in full, clear your existing debt before applying, fix any mistakes on your credit report and don’t make multiple applications for finance in a short space of time.
Prove your affordability
Ultimately, finance lenders want to know how you will pay back your finance and how much you can afford to spend each month. If you have little income or no income, you could consider getting a part time job to help boost your income. Alternatively, car finance for people on benefits can be a good choice for those who receive universal credit as income. Lenders can offer finance to people who receive benefits because they can see the applicant has a steady income that will be paid each month. If you have a part time job and also receive benefits, you should mention this on your application.
Borrow less
The more you borrow from a finance lender, the more you will pay back. The amount you want to borrow for a car will determine your monthly payments. If you want to keep costs low, you should only choose a finance amount that is right for you. It’s important that you can meet your repayments each month so your budget should be affordable and realistic. You could also consider taking out your loan over a longer term to help spread the cost. You should note that you may be more interest when you choose a longer term.
Save up for a deposit
It can be hard to save up for a deposit if you have little or no income but a down payment can be beneficial for both the lender and the applicant. For the lender it means that they don’t have to lend out as much and have more security that the loan will be paid back. For the applicant, you can benefit from lower monthly payments and a lower interest which means you will pay less back overall.
Choose hire purchase
Hire purchase can be a good choice for those who have little income or a bad credit score. Whilst it’s never guaranteed that you will get accepted for car finance, hire purchase could be a better option for you. Hire purchase is a type of secured loan which means the loan is secured against the vehicle and is owned by the lender throughout. This can be an option for people with little income because if you fail to meet the repayment, the lender can use the vehicle as collateral. The vehicle won’t belong to the customer until the final payment has been made.
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