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Securing car finance can be an involved process, one that causes headaches for many people, especially for those with challenging financial circumstances. These circumstances may include being on benefits. 

If you’re wondering if you can get car finance on benefits, the simple answer is, ‘yes you can’. However, with so many different types of benefits, the process may differ from case to case.

Caruno understands that just because you’re on benefits doesn’t mean that you don’t need access to a car for your day-to-day living. 

Through helping you understand the application process, along with what the requirements are, and what to be cautious of - you’ll have a far better chance of a successful application.

How does car finance for people on benefits work?

One of the most important factors for those seeking car finance, whilst on benefits, is your credit history.

Being on benefits doesn’t automatically mean your credit history is in shambles. But if your credit score is less-than-perfect, there are many things you can do to improve it, thereby increasing your chances of being accepted for car finance.

Read: Can I get car finance with bad credit?

If you pass the credit check, and lenders are happy that you’ll be able to repay what is owed, there’s a good chance your application for car finance could be approved. 

If you have bad credit, but can still prove you’ll be able to make all the required repayments, there’s still a chance you could qualify for car finance. 

You could consider the following options to increase your chances of approval:

Which benefits are accepted for car finance?

The following list of benefits may be accepted for car finance:

Please note - the benefits accepted for car finance will be subject to each lender, who’ll have varied terms and conditions.

Do finance companies see benefits as a red flag?

Yes, some finance companies do see benefits as a red flag. Some lenders, including institutions such as high street banks, will lean towards financing those with higher and steadier incomes. 

These decisions are also often based on a <a href="https://www.investopedia.com/terms/c/credit_scoring.asp">credit scoring system</a> – if your financial history has any imperfections - you won’t receive car finance from these high-end institutions. Again, there are many people on benefits who have a strong credit history, and won’t have a problem getting car financing through these lenders. 

Fortunately, for those of you on benefits with a less-than-stellar credit history, there are specialist lenders who’re prepared to lend money to higher risk customers, with less than perfect credit scores. 

Caruno would like to help those of you on benefits to get the car finance you need. By working with a diverse panel of funders, we can consider and match people from all credit backgrounds with the right car finance lender for their financial requirements.

Is the car finance application process different if you’re on benefits?

The car finance application process for those on benefits, is basically the same as for those who aren’t. 

The process begins with a credit check. If approved, the applicant will receive a certain amount of money that they’ll then have to repay, in installments, with interest, over an agreed upon amount of time.

However, as those on benefits may have a limited income, along with other potential financial pressures, this could reduce the amount lenders are willing to finance them. It may also affect the conditions attached to the financing, including interest rates.

Additionally, <a href="https://www.checkmyfile.com/jargon/credit-reference-agencies.htm">credit reference agencies</a> usually supply most of the information required by lenders straight to them. This information is then assessed by the lender, and a decision of whether to finance an individual is then made. 

When it comes to someone on benefits, these credit reference agencies may not have access to all the information that lenders require. 

The lender may have to get this financial information directly from the individuals themselves, to have an accurate and complete picture of their financial standings. Only then can an affordability check be completed, and a final decision made. 

When supplying this important information to the lenders, make sure it’s accurate. Any dishonesty will probably result in your car finance being denied. By presenting your information in a truthful and responsible manner - your case for car finance approval will be strengthened.

If you’re someone on benefits who has a poor credit rating, you’ll find the process a little more challenging and involved. This’d be the point that you could consider the before mentioned options for improving your chances of approval.

Car finance with benefits – what to be cautious of

There are many car finance options for those of you on benefits. If you have a good credit rating, these options are increased even further. 

You do, however, need to be aware of certain lenders who’re out to take advantage of your situation. 

Caruno wants to make sure you’re aware of these potential problems, so you’ll know where to apply caution in your application process.

Unfortunately, there are companies out there who want to take advantage of people in difficult situations. They specifically target people on benefits - charging them unreasonably high interest rates. 

The <a href="https://www.moneyadviceservice.org.uk/en/articles/paying-your-own-way%23yearly-cost-of-living">Money Advice Service</a> is an individual service, setup to assist people in managing their money. They’ve asked people to be cautious when searching online for lenders, especially when conducting searches such as ‘loans for people on benefits.’ 

Some of these companies aren’t credible, and are looking to exploit your situation. You could even end up paying an interest rate of anywhere from 500% to 4000%, instead of between 10% to 20%. 

This would add thousands of pounds to the total you have to repay and could lead to you failing to make monthly repayments. This in turn could negatively affect your credit score.

At the same time, be wary of very low or 0% interest rates. This could mean the cost of the car will be much higher. This makes it difficult to work out if you’re getting a good deal or not. Getting several comparative like-for-like quotes could help you to find the best value-for-money deal. 

‘Guaranteed lenders’ need to be approached with extreme caution. These companies don’t take your credit score or financial standings into account. This goes against the <a href="https://www.legislation.gov.uk/uksi/2010/1014/contents/made">2010 Consumer Credit Act</a>, and probably means the company you’re dealing with is prepared to break other lender laws along the way. 

With so many reputable lenders out there, getting involved with these companies is simply not worth the trouble.

When it comes to application costs, it’s a good idea to avoid online finance brokers who’re wanting to charge you an application fee. These fees are usually unreasonable – often as high as £300. 

Some of these companies may tell you that it’s a refundable expense, but, in truth, they have no real intention of refunding you the money, and will often make it as difficult as possible for you to get your money back.

Be careful about how many car applications you are making

Be careful of making too many car loan applications. This is because every application comes with a credit check. These credit checks can often come in the form of hard credit searches. 

Caruno will only perform soft searches on your credit file as we know the negative impact hard searches can have on your credit score. 

Furthermore, frequent applications will make you appear desperate, and as a risky bet for most lenders.

It’s a good idea to get like-for-like quotes for various used cars before making a final decision. In this way you’ll know whether you’re getting a good deal.

Believe it or not, in current times, there’re still lenders who may discriminate against you, based on your physical and/or mental condition. Not only is this against the law – it’s insulting and unnecessary. 

If any lender refuses to finance you, tries to increase the cost of your loan, or your interest rates, based on these reasons, you should cross them off your list immediately. Most reputable companies would never consider doing this. 

Caruno is committed to helping everyone find the most affordable and convenient car leasing option for their financial circumstances, and won’t discriminate against anyone based on their physical or mental condition.

Do you qualify for car finance with caruno?

Try caruno’s fast and easy <a href="https://www.caruno.co.uk/check-eligibility">eligibility checker</a> to find out your likelihood of approval for car finance.

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