When you apply for any sort of car finance or loan, you will usually be asked to pass a credit check, prove your income and budget your affordability. But what are your options if you have low or no income? Is getting finance possible? There are many reasons why you may be looking for a vehicle but have little or no income, for example being a student or being unemployed. For finance lenders it’s all about risk, the risk they take loaning you the money and whether you will pay it back or not. Before you get approved for finance, they want to know how you will be able to pay your finance back. They usually require you to pass an affordability check and a credit check to see how much you can afford and the likelihood of you paying it back. Whilst it’s not impossible to get finance with no or little income, there are a few ways in which you can increase your chances and get a better deal offered!
Getting finance with low income
There are a number of reasons why you may find yourself with little income, for example, if you are applying for student car finance or car finance with part time employment. Some lenders may require you to earn at least £800 a month before they accept you for finance. If you’re a student without a job, you could consider getting a part time job to help show potential lenders that you have a steady income and increase your chances of getting approved. If you have little income, you could also consider increasing your credit score to help get a better rate and instil more trust to the lender that you can be trusted to pay back your finance on time and in full.
Get a loan with no employment status
If you’ve been unemployed for a long time and receive no income, it can be very difficult to get finance. If you’re unemployed because you are between jobs, it can be possible to get finance when you start working again but some lenders require 3 months’ worth of bank statements before they would accept you. You could also have no employment because you are retired. However, receiving a pension can be used as proof of income and in conjunction with having a good credit score can get you approved for finance.
Car finance with benefit income
If you are in receipt of benefits, it can be possible to get approved for a loan or finance Benefit car finance can be more attractive to lenders than those with little or no income. This is because many people who receive benefits will get the same amount each month and can budget what they could afford for car finance. Some lenders accept many forms of benefits in the UK such as disability allowance, universal credit, and carers allowance.
How to increase your chances of getting finance?
Whilst it can be possible to get approved to finance there are a number of ways in which you can help to get accepted and also get offered a better interest rate.
Get a guarantor on board
Having a guarantor to support your application can show lenders that you are serious about getting finance but gives the lender more confidence that the loan will be paid back on time and in full. A guarantor can be a friend or family member who agrees to meet the repayment deadline if you fail to do so. If you don’t pay, your credit file can be negatively impacted. If your guarantor fails to pay too, their credit file can be affected too.
Increase your credit score
As mentioned above, increasing your credit score could make it easier for you to get approved for any sort of personal lease or finance. Generally, people with better credit scores get access to better finance rates. This is because they are seen as less of a risk to lenders. Having a good track record of meeting repayment deadlines on time and in full can help to get you accepted.
Save up for a deposit
Whilst it can be hard to save money when you have little income, having a deposit to put down for finance can be beneficial. When you put more money in for finance, you don’t have to borrow as much from a lender. This can be beneficial for potential lenders as they don’t need to lend you as much. It can also help to save you money in the long run by reducing your monthly payments.
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