Can I apply for car finance with a low income?
If you’re on low income and are struggling to afford to buy a car outright, you may be wondering if you’ll even be accepted for car finance.
The good news is, your income isn’t the only aspect of your application lenders look at when taking your application into consideration. Other things include:
-Your credit score
-Borrowing history
-Loan type
-Loan amount
-Type of vehicle you’re looking to finance
There is no set amount of income that determines whether you’ll be accepted or refused when it comes to applying for a car finance loan. Lenders are only interested in the regularity of your income to show you do have a means to pay for the loan.
Can I get a car loan if I’m on benefits?
While lenders do consider your income source, this can include benefits that you are receiving. The following alternative incomes can be considered too:
-Jobseekers allowance
-Universal credit
-Income support allowance
-Child tax benefits
-Working tax credits
-Disability living allowance (DLA)
-Carers allowance
-Personal independence payment (PIP)
Affordability checks
Affordability checks are increasingly becoming a necessary stage in the car financing process, as well as a requirement of being a responsible lender. Lenders will calculate your disposable income based on your monthly income and outgoings - the amount left over after all of your essential expenditures have been paid.
You're more likely to be able to afford a car payment if you have greater spare income, and therefore pose less of a risk to lenders. If you have less disposable income, you’re more likely to be perceived as a greater risk as there’s a high chance you’ll miss repayments meaning the amount you receive could be less or the interest could be higher.
How do I improve my chances of being accepted for a car loan if I’m on low income?
1) Improve your credit score
While your credit score and income aren’t inextricably linked, (neither has any bearing on the other), your credit score is a big deciding factor for lenders when considering your application.
You can check your credit score and report using a site such as Experian, and with this you can check the following factors and if they’re affecting your score:
-Whether or not you've ever borrowed money before, and when
-Whether you've paid off your debts or are making regular payments
- Any trends of late or missed payments
-How many times have you applied for credit
-The difference between the amount of credit you have available (such as a credit card limit) and the amount you actually use
-Any public records, such as CCJs or bankruptcies.
The best way to improve your credit score, though, is to keep up with regular repayments and try to whittle down your credit balances as much as possible.
2) Save for a larger deposit
The bigger the deposit you put down for a car finance loan, the less you’ll have to borrow and the smaller your repayments will be. This will also help bring down potential larger interest rates.
3) Consider a guarantor
A guarantor is someone who steps in just in case you miss a repayment on your loan. This is usually a close friend or family member. If you decide to proceed with this option, it can place some reassurance back into that lender that the repayments will be made, even if you miss one, therefore increasing your chances of being accepted.
How Hilton Garage can help
If you’re struggling to be accepted for a loan due to low income, our partnership with various finance lenders means we can help you find a finance deal, no matter whether you are self-employed, a temp worker or claiming benefits.
We’re able to help people from various financial backgrounds all with the aim to find you a finance option that suits your circumstances. We’ll talk you through all the different finance options, and help you to find an option with finance repayments that suit your budget.
Find out if we can help by filling out our free finance checker. We only conduct soft searches too, so there is absolutely no impact on your credit score.
Once you’ve discovered whether you’re eligible, you can browse through our various cars and vans from manufacturers including Ford, Mercedes-Benz, Mazda, Peugeot and much more. We’re here to help you every step of the way to find the car and finance deal that is right for you.