Car finance is a great way to help spread the cost of owning a car, especially when you don’t have the money to hand to buy one outright. Its worth remembering though that car finance is subject to status and before you can get a car on finance, you will need to pass an affordability check and usually a credit check too. Having a low income could affect your chances of getting a car but there are ways in which you can help increase the likelihood of getting a car with low income in just a few easy steps!
What is affordability?
Car finance affordability refers to how much you can comfortably put towards your car finance payments each month. Your budget for a car should be realistic and affordable as it’s important that you can meet each and every payment till the end of your finance term, which is usually a couple of years. If you fail to stick to the rules of your agreement, the lender can take the car off you if it’s a secured loan and it can have a detrimental effect on your credit score. This is why it’s important to never take out a loan that you can’t afford to pay back.
Can you get a car on benefits?
Usually lenders favour applicants who have a full-time job with regular income, but it can also be possible to get a car on finance when you have no job but get benefit income. For many people, their benefit income is a steady and expected payment each month and there are a number of types of benefits that are now accepted by car finance lenders. Even bad credit car finance on benefits can be possible but it can be worth searching for a bad credit specialist lender to help as you may be declined by mainstream lenders. You will need to show evidence of the benefit income you receive before you can proceed with your finance, but this can be done through the use of bank statements.
How to increase your chances of getting a car with low income:
Whilst car finance is never guaranteed, there are some factors to consider to help get you approved.
1. Get a guarantor.
If you’re struggling to get approved on low income, you could consider taking out a guarantor car finance deal to help. A guarantor is when a friend or family member promises to make your car finance payment if you fail to do so. Froma lenders point of view, this means they essentially have two chances of the loan being paid back on time. If you have had problems in the past with making payments on time, it may be hard to find someone to support your application but having a guarantor in place could increase your chances.
2. Increase your credit score.
Your credit score is really important when it comes to getting a car on finance. No matter what your income, it’s always good to have a healthy credit score when you apply. A better credit score can see easier acceptance rates and also get you a better finance deal with a lower interest rate. Lenders usually reserve the best rates for those with good credit as they are less likely to default on their loans or finance.
3. Consider a joint application.
A joint application is different from a guarantor deal as both applicants are equally responsible for meeting the repayment deadline. Usually, joint applications work best when you are married or in a relationship and can help you get approved when you have low income. If your partner has a higher income than you, lenders can use both of your information to help get you approved.
4. Get a second income.
It may seem pretty obvious but it you also have a low income you could consider taking on a second income. This may not be suitable for everyone but even making some money to put towards a deposit can be beneficial. Having a better income means you can usually afford a higher monthly payment which can mean you could get a better car for your money.
5. Put down a bigger deposit.
There are many finance deals that don’t require a deposit but having a deposit to put down for car finance can be beneficial. Agreements such as hire purchase benefit from a larger deposit because you are reducing the loan amount and it can make your finance deal more manageable.