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Can you get car finance if you are on benefits?

can you get car finance if you are on benefits
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For most people a car is a necessity, whether it’s for getting to work, ferrying children around or just doing the shopping. If you’ve got children, safety and reliability can be key issues and it’s not always practical to buy a cheaper, older model.

What are your car finance options?

With the squeeze on household finances, the majority of consumers won’t have the savings to buy a car outright. Therefore, purchasing a car on finance is often the preferred method. However, if part of your income is through benefits, what options are available to you?

Good credit rating?

There are lenders who will finance a car for consumers on benefits, but you choice will be more limited. Interest rates will vary and this usually depends on your credit rating. Unfortunately if you’ve got a fair or poor rating then it’s unlikely that you’ll be accepted for a traditional loan.

The best way of ensuring that you’re accepted is to try and maintain or build up your rating. Make sure that you’re on the electoral role and pay your current loan or credit payments on time and in full. It’s also worth requesting a copy of your credit report before you apply. This way you’ll know exactly what’s on there and can have any errors corrected.

can you get car finance if you are on benefits

Ability to pay

Lenders will assess your ability to pay based on your total income from benefits and any wages against your other financial commitments. Therefore, it’s important to consider whether you can afford the finance before you apply. Write down all your incomings and outgoings and see what you have left at the end of the month or where you can save some additional money. There’s no point applying if you’ll be turned down anyway, as it will leave a footprint on your credit file.

Poor credit rating

If your credit rating is low and there’s no possibility of improving it in the immediate future then most lenders will not approve you for a loan if you’re also receiving benefits. However, you might be able to get the money if you can provide a guarantor for the loan. This is usually a close friend or family member who has a good credit rating themselves and is employed. They will agree to make the repayments if you default, so there’s more chance of the lender accepting you.

Don’t immediately reapply for other products if you’ve just been declined for one. Each time a lender checks your credit file it leaves a note, so others can see what you’ve applied for and whether you’ve been successful.

If you’re unsure if you’ll be accepted see if the lender can do a softer pre-application check first. This assesses your circumstances based on the criteria to see if you’re likely to be accepted. However, unlike a full check it won’t leave a permanent record on your file.

Get independent advice if you are unsure

There won’t be many options available to you, but acquiring car finance when you’re on benefits is possible. As with any finance product it’s best to seek independent financial advice to secure the best deal.

LenderLoan Amount
over 48 months
Representative APR%Cost 
£7,5007.8% APR Representative£181.46 per monthApply
£7,5005.8% APR Representative£174.94 per monthApply
£7,5005.8% APR Representative£174.94 per monthApply

 

 

 

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About Catherine Stern

About Catherine Stern

Catherine Stern is a freelance writer with a background in marketing and PR. She currently writes web content on a range of subjects, from finance and business to travel and home improvements. As a working single mum of two young boys she understands the pressures that today’s working parents face and the topics they want to read about.

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