What Checks are done for Car Fianace?
What do they check when applying for car finance?
Applying for car finance can be a reasonably stress-free experience. However, as you would expect, the lender must carry out specific checks to verify and protect your identity and establish you can afford repayments on the amount you want to borrow.
Understanding what checks the car finance companies do and why can help you get your finance application approved swiftly and smoothly.
Several types of car finance are available, the most popular being Hire Purchase and Personal Contract Purchase. However, the application checks for whichever finance you apply are much the same.
You’ll need the following information with you to apply for car finance.
When you apply for car finance, lenders must be able to verify you are who you say you are. Your photo driving licence is the best proof of identity when applying for car finance; however, you can also use your passport.
You’ll need to supply the last three years of your address history. You must have also been a resident of the UK for three years, or you’ll have difficulty finding a lender to accept your application.
Most lenders require a full driving licence. However, some providers offer car finance to provisional licence holders.
You might need to give your employment details for the last three years.
Another confirmation is for self-employed applicants and those not in employment, such as benefits, students or on a pension.
Proof of income will be necessary to ensure you can pay your monthly repayments. Most providers will accept three months of bank statements.
The lender may want to carry out an affordability check to ensure you have sufficient disposable income to pay for your vehicle’s financing and running costs. This check also helps them verify the amount you can afford to borrow.
There is often confusion about credit checks when applying for carfinance. There are potentially two checks on your credit file.
The first is when you make the initial application a Soft check, which will not affect your credit score.
The second, known as a Hard check, occurs only with your permission after you have received a quote from a lender and decided to proceed. This check is recorded on your report and could affect your credit score if you get declined.
Before starting the finance application process, use our car finance calculator to help you budget for a car you can comfortably afford.