How to Apply for Car Finance

How to Apply for Car Finance - RateWise
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Car finance is one of the simplest ways to ease the task of buying your dream car. The process may seem time-consuming, but in reality, it is not.  How to apply for car finance?

This question clicks in your mind every time you consider buying a car. The procedure is simple, but you have to decide the type of deal you require, like hire purchase, loan lease, or dealer finance. Nowadays people prefer using car finance to buy a car.

It is necessary to prepare before applying for car finance as it will help you to get more favourable opportunities and better prices for a vehicle. The prior preparation will make you confident, will lower your stress, and will result in a successful experience.

To assist you on this journey, we are going to discuss some essential points that will ease the task.

Know about the car finance options

When you apply for car finance, there a variety of finance options available depending upon the car you want to drive and your personal preference. The three options available are PCP, HP, and personal loans.

You can also consider guarantor loans, leasing, lease purchase, and some deals that do not require a deposit. It is necessary to understand the benefits and drawbacks of different options when you apply for car finance.

You can also take help from any person who has a better understanding of the finance domain.

Pay attention to your credit report

When you are planning to apply for car finance, your credit score is one of the main factors that play an essential role. A credit score is the mirror of your financial well-being.

It is necessary to know your credit score when you apply for car finance as it will help you decide if you are going in the correct financial direction or not. There are many websites available that will allow you to know your credit score before you take the step to apply for car finance.

Raise your credit score 

Once you have checked your credit score, it is time to find ways to improve it if it is low. Many things affect your credit score, such as the number of times you have applied for credit, your address history, how much credit is used, and also the payment history.

Even a small amount of finance activity makes a difference. You can improve your credit score by paying bills on time, using less credit, and being on the electoral roll.

These things will help in improving your credit score and that will be helpful when you apply for car finance.

A soft search is mandatory

Before applying for car finance, it is necessary to conduct soft searches to make sure that you are possibly sure of getting your application accepted. Soft searches will tell you about your eligibility so that you can easily make a decision.


Fixing a budget plays a crucial role when you are looking forward to applying for car finance. This will help you know the best car finance option for you.

Setting a budget means you know how much you can spend as you apply for car finance, and this will help to make the correct decision. Budget fixing will make you aware of how much you can spend each month with ease and how much overall you can spend without adding extra burden.

The options available for car finance have different features such as PCP may offer low monthly payment as compared to HP, but it requires a large balloon payment. 

And yes, while setting a budget, make sure to consider other expenses too, which include MOT, car tax, service, maintenance, and fuel.

Get aware of the entire cost of agreement

Every deal comes with some critical and hidden instructions and can profoundly affect your financial decision. Some deals may look inviting as they may have low monthly payments.

However, you may have to make a significant payment at the term-end. Some finance options are flexible and straightforward, with high monthly payments but are cheaper overall.  Also, focus on the interest rates as it will affect the overall cost. 

Get ready for the paperwork

As a borrower, you will have to submit various documents that will ensure your eligibility as well as guarantee for loan repayment. The reports vary from lender to lender, but there are few that you must keep ready when you apply for car finance.

Get your ID ready, that can be your driving license or passport, etc. A document providing proof of address is also necessary, which includes your last three months’ bank statements or utility bills.

Income proof is also essential. Keep the soft copies of all the documents so that you may get them printed whenever required. This will make the process smooth, and you will escape from the last-minute rush.

Negotiating is not a bad idea

Don’t think whatever the lender offers you is fixed because there is always a scope of negotiation when you apply for car finance. Once you have set the budget, it’s time to know the deposit you need and also the amount you will spend as a monthly payment.

It will help you figure out which finance dealer is offering the best deal to you. This can be done by comparing the offers from different lenders, which can be the bank or companies.

Preapproved loan

Check interest rates at different lenders. You can begin this process with the bank because some banks may offer a discounted interest rate for their existing customers.

Credit unions provide low-interest rates. Once you compare the terms of different lenders, you can fill out the credit application and check for preapproval.

Now you can show the preapproval letter to the dealer indicating the interest rate and the loan amount, which can be used as a bargaining tool.

The dealers will try to improve the terms once they know you have been preapproved for a loan, as it will be profitable for them if anyone of their partners provides the credit.

Decide about your existing vehicle

When you have an existing vehicle and want to sell it to buy the new one, then figure out how much it’s worth. You can sell it to other consumers or to a used car dealer, which can be less profitable.

You will get more money when you sell it yourself; however, there are certain risks involved in it as you don’t know the strangers you may be selling to and it consists of a lot of work.

Moreover, you need to clean and prepare the car as a consumer will evaluate it accordingly. Don’t forget to negotiate and focus on paperwork too.

Another way to sell your old car is to go to a dealer, which involves less stress, but you will get less value for your vehicle. This way, you can easily collect your deposit for when you apply for car finance, and ultimately your financial burden will be less. The higher the deposit amount is, the less you need to pay for monthly instalments.  

Don’t lie for your benefit

When you apply for car finance, make sure that you provide truthful information. Some borrowers lie for the sake of getting their application approved.

However, once the lender gets to know the truth, the car finance application will be rejected and will harm the credit rating, which will be trouble for you when getting future credit.

Giving wrong information is fraud and a criminal offense. Ensure to check all the provided information twice whether you or any dealer is submitting it to the finance company.

Don’t be shy to ask questions

Many questions need clarity when a borrower is going to apply for car finance. Don’t think that the query you want to ask will show your stupidity because it’s better to ask than making the wrong decision that can affect you in the future.

Ask whatever is on your mind and clear it up so that you can make a better decision. If you do not understand what the dealer is explaining to you, then don’t be shy and ask to clarify things until you get the point. The dealer will explain the ideas, and at last, you will understand.

You can also request to put the crucial points in writing so that you can read them and clear up any issues.

Do not make any quick decisions, and if you do not feel comfortable, then leave the place. Take your time and know the points clearly before stepping ahead to apply for car finance.

Final words

The above-mentioned steps will help you make an informed decision because you will know which vehicle you can afford comfortably. The clear picture of your monetary condition will assist you in negotiating the finances with confidence.

You can browse through various credit brokers available on the internet to find the best deal by comparing the options.

This will give you an idea about loan costs, charges, or any fees involved, and your application will likely be accepted when you apply for car finance.

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Categories: Car Finance
Tags: How To