If you are on benefits, does not mean you can’t apply for car finance. Sometimes it can mean your reasons for needing a car is sometimes greater, so if you want to apply for car finance then don’t let being on benefits prevent you from applying. However you do need to know your limits, how much can you afford to repay, this means that when applying for a car that you have to have realistic expectations of the type of cars you can afford. Here we are going to try and explain how you can get car finance whilst being on benefits.
Is being on benefits mean you are a red light to lenders?
A lot of lenders will focus on the credit score. If you have a bad credit score means you will struggle more to get finance for a car than if you have good credit. Being on benefits doesn’t necessarily mean you have bad credit so you should be able to apply for car finance. It sometimes relies on your monthly income. Trying to find a suitable lender for yourself can be difficult, so using a company like us means it can make it a whole lot stressful.
Different lenders look for different types of details with customers. For example, lenders such as banks have a preference for lending to high incomes rather than lower. Others focus on credit score to decide whether you are a high-risk lend.
There is also the opinion of specialist lenders who generally tend to cater for high risk people with bad credit and as previously said just because you are on benefits doesn’t mean that you have bad credit. Having good credit whilst being on benefits means being in good stead when applying for car finance.
The agencies that provide the finance lenders are called credit reference agencies. These although pass information over on to the finance lenders, they don’t have all of the information the lenders need. They don’t have income and outcome details, They also don’t have employment details. This is the information comes from you the borrower. This allows the finance lenders to run an affordability check. This allows the borrower to paint a picture of themselves and what they can afford, what your employment status is, what your income is.
If I’m on benefits will car finance be different?
The answer is no! Car finance is the same for people who are on benefits. You still apply for a sum of money, then interest is added on to this amount and then this is repaid over an agreed period of time.
However, if you are on benefits it usually means you have limited income which has other financial pressures on it. This can often mean that the amount that a lender will lend you will be smaller as there are usually capacity restrictions, It also may mean the interest may be higher.
The lenders make their money back by the repayments. However, if you have missed payments in the past you may be seen as a high risk to a lender. If you are a higher risk then they are either less likely to lend to you or the interest that will be added on to your payments will be higher. Borrowers, however, do need to be aware that lenders can often charge high interest to low-risk clients. This is something here at The Car Finance Companies we can avoid. We can ensure you get the best deal for you.
Things to keep an eye out for when applying for car finance on benefits
There are plenty of finance options out there even if you are on benefits. But there are certain types of lenders to keep an eye out for as some lenders will try to take advantage of groups of people. These are a list of other things to keep an eye out for:
- Excessive loan applications:
Making to many applications can reflect badly on you and affect your credit score badly. This is something you want to avoid. A way to avoid this would be to apply for finance through us. We have a good relationship with all of our external finance companies.
- Interest rates
Interest rates are something to really consider when buying a used car. If you are on benefits it usually means you have a limited amount of spare money due to other financial needs. Some companies will say they have low-interest rates but thus sometimes can mean the higher cost of the loan will be included in the price, this means it can be hard to see if the deal is good or not. Alternatively, interest rates can be very high. These tend to be aimed at higher risk borrowers. This usually means the monthly payments are higher and sometimes can be unaffordable.
- Application fees
Some finance application will charge you. These are applications that can be avoided as fees can be very high. Here at The Car Finance Companies, we don’t charge for an application fee.
There are other options out there
If you are on benefits and need lower monthly payments then Pay as you go car finance is an option. If you are on benefits or struggling to get finance, then something similar to a higher purchase may be a good option. This means the finance company will be a have access to immobilise your vehicle if you miss a payment. It also remains the property of the lender until the full balance paid. This is just another option that is available, however, there is usually a good chance that finance is an option for you.
Just remember to be realistic with your lending amount. Make sure that the monthly repayments are affordable and that you aren’t persuaded to lend more than you wanted too. Stick to your budget.
The Car Finance Companies provide you with a massive selection of used cars and vans. We are based in Liverpool, Merseyside but can deliver UK wide. Check out our stock range and give us a call on 0151 523 4000 to get started on getting that dream car today!