How to increase your chances of getting a car loan.

Charlotte Miller

Updated on:

Car finance is a popular way for drivers to spread the cost of owning a car instead of paying for it in one lump sum. The price of both new and used cars is expensive and more drivers are relying on credit to help them get a car. Unfortunately, car finance lenders can’t offer a finance deal to everyone who applies, and some candidates won’t be suitable for a car loan. If you have already been refused or declined a car loan, you may be wondering how to get approved. The guide below looks at the ways in which you can improve your chances of being approved in the future.

What is car finance?

Car finance or a car loan can come in many different forms. However, it usually involves a lender buying a car on your behalf or giving you the money to buy a car. You then make monthly payments back to the finance lender until the end of the agreed term. Before you can get approved for finance, a lender will decide whether they want to offer you finance or not. Based on your personal situation, a lender may approve or decline a car loan application. No car finance company can guarantee car loans because it would be unethical if someone could not afford to pay the loan back.

If you’re worried about the likelihood of being approved or have recently been declined, follow the steps below to better your chances.

What do lenders consider before approving your finance?

Below are some of the most common personal factor’s lenders may look at before offering you a finance deal. However, at the end of the day, the decision does sit with the individual lender so please use the below as a guide.

A good credit score.

Your credit score is a great reflection of how capable you are of paying back loans or finance on time. Due to this, you will usually be required to pass a credit check when you apply for a car loan. If you’ve no previous credit history or you have made credit mistakes in the past, you may find yourself with a low credit score. Bad credit can be off-putting to lenders and can even be grounds for a declined application. If you have low credit, it is recommended to improve your credit score before applying for a loan to help you get approved.

Put down a deposit contribution.

When you’re searching for car finance, you’ll see many no deposit car finance deals which can be attractive. There is no catch to paying no deposit but having some money to put down could be beneficial to you. When you put money down for a deposit you are lowering the total loan amount. Lenders may favor applicants who have a deposit because it means they don’t have to lend out as much and it shows good financial responsibility.

A full UK driving license.

It would probably surprise you how many people apply for car finance when they don’t even have a driving license. Lenders are wary of people wanting to finance a car for someone else or in someone else’s name as it can increase the risk of fraudulent applications. For this reason, many lenders will ask you to have a full UK driving license in your name before you apply. They may decline you if you have no license or are a provisional license holder.


One of the most important aspects of getting a car loan is if you can afford to pay for it. Lenders may set a minimum monthly income amount you will need to receive to be approved. To help verify this information they will usually ask for either 3 months’ worth of bank statements to prove your affordability or pay slips from your employer to verify your wage. You will usually be asked how much you can afford to pay each month and as a rule, you should never spend more than 10% of your monthly income on a car finance payment. Keep this in mind when assessing your affordability for car finance.  

Term length.

Usually, car finance agreements can be spread over 3-5 years, but some lenders may offer you shorter or even longer loan term options. You can adjust the loan term to fit in with your budget. You should always choose a term length which suits your budget and your financial situation. A longer loan term may seem attractive because it lowers your monthly payments, but it can increase your interest rate, making finance more expensive overall. You should only apply for a loan you can afford with a payment term that is achievable.