Lenders will use the details you provide them to decide whether you are eligible to borrow money from them. It's therefore important that you provide them with accurate and true information.
As well as needing documents from you, lenders will also perform soft and hard credit searches on your credit profile, which will allow them to see previous loans you've applied for and your repayment history.
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The reason lenders ask for information and review your credit history is so they can identify whether you will be able to make your repayments and how a loan could affect other monthly outgoings.
Providing these details will help a lender make an informed decision about your eligibility. Once your application has been approved, they will require formal identification documents before the final contract can be signed.
Alongside your full name, you will need to provide your date of birth, marital status, residential status and your full address history for at least the previous three years.
For lenders to understand your income status and that you do have a means of bringing in some form of salary, you will need to provide employment history for at least the previous three years.
This includes the name and address of your employers, plus the job title you held in each position and salary. If you are self-employed, you will need to provide other details, such as payslips, as this information is more difficult to find for lenders.
If you run your own business or limited company, lenders can find the details with Companies House, which should make the loan application quicker for you.
Lenders will require the bank details for the account that you will be making your monthly repayments from. It will include your branch address, sort code and account number.
Alongside your personal information, lenders will require you to provide them with identification documents so they have all of the details to accurately decide whether to approve or reject your application.
To apply for car finance, you will need a full and valid driver's license. If you only have a provisional license and are attempting to buy a car on finance in anticipation of passing your test, your application will get rejected.
If you can't find your driver's license, you will have to provide additional proof that you hold a full license. You could show the certificate you would have got when you passed your test. Sometimes, you may be able to get away with your passport, and the lender could use that to contact the DVLA on your behalf to check you have a license.
Proof of address
Lenders will require you to provide them with at least three years of your address history as an additional check to prove you are who you say you are.
To prove this information, you could share a utility bill, as long as it has your name on it. It may be more difficult if you are living with your payments and aren't the bill payer, so they would likely ask for payslips or bank statements with proof of address.
If you are providing a bank statement to prove your address, you are permitted to hide any financial information if you are worried about lenders getting access to that.
Typically, proof of address documents need to be dated within the last three months to provide further evidence that it is your current address and not somewhere you may have lived several years ago.
Proof of income
Lenders may not be completely satisfied with your employment history and income and may require you to provide evidence of your earnings over the past few months.
It's more common if you are self-employed, and if you use an accountant to watch over your balances, it's easier for you to give the lender their details and for the lender to call them directly.
However, if you don't have an accountant, you may be required to show bank statements over some time to prove that you earn what you stated that you do.
If any of your clients pay you in cash and you can't prove your income via bank statements, you will need to show evidence of your tax return submissions to help validate your application.
Lenders only want to lend to people they know will be able to pay them back. If you are unable to show sufficient proof of income, or they have any doubt that you may be unable to make other monthly repayments, your application will be rejected.
What if I don't have three years' history for my application?
There are several reasons why you may be unable to provide three years' history for certain requirements in your car finance application, and it's a common problem.
For example, you may be a new driver who has only started working in the last year or two. You may be retired and have not worked in several years. Or you might have recently moved back or to the UK, and have no address history.
It doesn't mean that your application will be rejected, but you will need to let the finance company know at the earliest possible time so they can discuss the options available.
Car lenders need to be 100% certain that you can make repayments to them, and if you're unable to provide them with a history of where you've lived for the past three years, you may be deemed high-risk.
If you are a young adult and have only recently started to work, lenders may be apprehensive about lending to you. One option is you apply for finance with a guarantor, to give the lender extra peace of mind you can make repayments.
As long as you can provide sufficient enough evidence, or have a backup plan to how you will make repayments, lenders should be willing to approve your application, unless there are any other red flags which could deem you a risk.
What happens next?
Once you have gathered all of the required information together, copies of your documents will be sent to the lender and they will draw up the contract for you to sign.
If there are any additional problems once your documents have been sent off, the lender may ask you to provide further evidence to enable them to approve your loan request.
If you are rejected for a loan, it's generally difficult to appeal or find out too much information as to why you were refused, so when applying, ensure all the information you supply is correct to avoid any issues.