If you’ve found your dream car and are eager to get on the road, one of the worst things that could happen is being refused for car finance.
There are a few reasons this could happen but there are ways you can prevent it in the future, so you can get on the road in your perfect vehicle.
What happens if you’ve been refused finance for a car?
It can be a real disappointment if you’ve been refused car finance, especially if you had your heart set on the perfect car.
If you’ve been refused car finance, it will usually be due to issues with your application or a poor credit history. This means you’ll need to find another way to pay for your car.
It’s a good idea to figure out why you’ve been turned down for the finance and see if you can fix the issue.
You can check your credit score by using an online credit checker, or have a chat with the finance company to see if it can give you some pointers.
Learn more about Personal Contract Purchase and Hire Purchase car finance
Why have I been refused car finance?
The first thing you should do if you’ve been refused car finance is figure out why this has happened.
Even small things like errors in your application can lead the finance company to refuse you, so it’s a good idea to see if something small is holding you back and can be fixed.
Is your credit history too poor for car finance?
It’s worth taking a look at your credit history before applying for car finance, as a low credit score will mean the lender is less likely to accept your application.
Poor credit history might also mean the finance company will offer you the finance but with higher levels of interest.
It’s worth seeing if you can boost your credit score ahead of applying for car finance to increase your chances of being accepted.
Are you old enough to apply for car finance?
There are age restrictions when it comes to car finance – if you’re under the age of 18 then you legally cannot be approved for the loan.
Even if you’re turning 18 and are applying for your first car finance loan, you might find that it’s still harder to get accepted.
Lenders are less likely to offer car finance for young drivers, but it does get easier over the years.
Do you hold a full licence?
Lenders will refuse your car finance application if you only hold a provisional licence, so make sure you’ve passed your test before applying for the loan.
This isn’t the case for a personal loan, however, as you’re borrowing money from your bank and not a finance provider.
It can be tempting to apply for car finance on your dream car as soon as you start learning to drive (who wouldn’t want a fancy car to practice in?) but you’ll need to wait until you hold that all-important full licence.
In the meantime, you can focus on boosting your credit score and saving money for a deposit.
Are you self- or unemployed?
When applying for car finance, your lender will want to see where your regular income is coming from.
If you’re currently unemployed, it’s likely the lender will be worried you won't be able to cover your payments and will reject your application.
If you’re self-employed, the finance company might also be a bit apprehensive about approving your application.
It can be hard to prove to the lender that you’re able to cover the payments, but supplying evidence of your earnings can be helpful.
If you can show the car finance company evidence of three years' worth of income, this can improve your chances of being accepted as a self-employed person.
Car finance on benefits
Will a rejected car finance application affect your credit score?
When you apply for car finance, the lender will carry out a hard check on your credit report to see if they can approve you for the loan.
The hard check will leave a mark on your report and will be visible to future lenders, but the outcome of the check won't be recorded.
That means future lenders can’t see if you’ve been approved or refused for the finance – they just know that you’ve applied.
Having too many hard checks on your credit report can bring down your credit score, so it’s best to apply sparingly.
Getting too many hard checks for different types of finance can give the wrong impression to future lenders.
Learn more about car finance:
How to get accepted for car finance
What type of car finance is best for me?
