Have you been refused car finance and don't really know what that means for you? Well, we're here to answer some of the key questions you're probably asking and trying to find the answer to.
Car finance is ideal for people that want to spread the cost of a car out across several years with fixed monthly payments. It is also one of the best ways to improve your credit score because you are proving you can afford to repay the lender.
It's also great for those that want to be in a new car every few years and it can also be used when buying both new and used cars so you have multiple options when considering finance.
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However, for some, unfortunately, finance isn't possible for a variety of different reasons and it can be disheartening trying - and failing - to secure a car on finance, particularly if you need one for work or to care for children or others.
Although you may be someone that has previously been denied finance, there are tips you can take on to help you, and we take a look at all the next steps available to help you overcome your finance rejection.
If you've applied for car finance and been refused, the likelihood is that your credit score isn't the best. Your credit score and history are two of the main factors that lenders will look at before deciding whether or not to loan you the money required.
If your credit score isn't too strong, this may be enough evidence for you to be refused, purely because it indicates that in the past you've missed payments or you've taken out too much money that you can't afford to pay back.
There are several factors as to why your credit score might not be in the best shape and they can include already having outstanding debts and missing or making late repayments on other loans such as a mortgage or credit cards.
If you've been refused car finance, it's probably a good idea to first try to establish exactly the reason for the rejection before you apply again. Multiple finance applications can bring your credit score down further, which will make you even less attractive to prospective lenders.
It can be easy to panic and worry about the future if you do have a poor credit score as it may significantly increase your chances of being rejected for loans at a later date.
But there are plenty of ways to improve your score, and one of those is ensuring you make your other credit payments on time as this is a great way to show lenders you can afford to repay them.
Before you make a proper finance application, it's worth doing some research and perhaps seeing if you can get a pre-approved loan. Most of these types of applications state that there will be no impact on your credit score, and it's a good way to establish your chances before making a formal application.
Being rejected from a car finance application can affect your credit score, but it does largely depend on who the lender that rejected your application was, as mentioned above, multiple applications can negatively impact you.
A soft search of your credit score and history is the best thing for you to allow as it won't impact your score, just give you an idea of where you're at.
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There are several reasons why your car finance may have been refused.
Poor creditThis can be kept on your file for up to six years. It is easy to rectify though and things you may not realise such as being on the electoral roll and changing address frequently can hopefully be managed.
AffordabilityOpening a new credit card account or if you've applied for other loans recently can impact you negatively.
Lenders' criteriaLenders can pick and choose who they lend their money and some may just be stricter than others.
AgeIf you are under the age of 21, some lenders may be inclined to reject your application. With car finance, though, they're normally more laid back when it comes to those between the ages of 17-21.
Employment statusYou will need to prove that you're employed and taking home a salary every month that's in line with what they're prepared to lend you. However, it's the other things that will count in your favour too, such as making other payments on time.
Driving licenseIf you're applying for car finance, you will need a full and valid UK license to be approved. So make sure you pass your test before making an application or you may find yourself struggling to get it again in the near future if rejected.
If you've been refused credit elsewhere, that doesn't mean you won't be approved by another lender. The rejection will however be shown on your credit file so that's something to consider if applying for another loan in quick succession.
If you follow the above tips then it should help you out when reapplying for a loan elsewhere.