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5 top tips for getting approved for finance when you’re retired

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Many of us dream of the day we can retire and finally enjoy our free time. Being retired means you can do the things you want to do, start a new hobby, or just spend time with the people we love. Many older people may also rely on a vehicle to be able to do such things and if you’re in need of a new car, you may be wondering what your chances of obtaining car finance are. When you’re retired you no longer receive a wage each month. However, you may receive income in the form of a state or private pension. The guide below looks at how to get a car when you’re retired and top tips on how to get approved for a car loan.

Why choose car finance?

Car finance is a great way to help spread the cost of getting a vehicle. Car finance applicants need to be between the ages of 18 and 70 years old to be eligible for a car loan. A car finance agreement allows you to pay for a car in affordable monthly payments till the end of an agreed term. By spreading the cost, you can usually get a newer, better car than you would when paying with cash alone and can pay for it over a period of time that suits you. There are also a number of car finance agreements to choose from and you may be better suited to one over overs. It can be worth exploring hire purchase, personal contract purchase and personal loans in more detail to see which would suit you best.

Is it possible to get a car on finance when retired?

It’s always worth keeping in mind that car finance is never guaranteed and the information in this guide is subject to status. Car finance lenders will consider each and every individual applicant and through their own eligibility criteria, they can decide whether they want to offer finance or not. The good news is, though, that getting a car on finance when you’re retired can be possible. Lenders will assess your ability to meet repayments, based on your previous history of borrowing, usually through a credit check, and also check your income to ensure you aren’t taking out a loan you can’t afford to pay back. You can use pension income as proof of affordability, as long as you meet the minimum income required by your chosen lender.

5 ways to increase retired car finance approval rates

If you’re looking to get a car on finance when you’re retired, there are a number of factors you could consider to help you get accepted and also help lower the interest rate you are offered. A lowered interest rate helps to make car finance more affordable and means you don’t pay as much to the lender in interest.

Have a good credit score

Not only is car finance about affordability but it’s also about the likelihood of you paying your loan back to the lender on time and in full. Your credit score and history of repayments is a good way to determine whether you’re going to default on future loans or not. A bad credit score usually indicates missed or late repayments in the past, high levels of existing debt, or using too much of your available credit. This increases the risk to the lender, and they may decline you. Where possible, you should try to increase your credit score in the months leading up to a finance application and try to clear any debt you currently owe first.

Put down a deposit at the start

A deposit at the start of a car finance agreement may be required by some lenders and it can sometimes be around 10% of the value of the car, so it’s worth keeping in mind. There are many agreements which don’t need a deposit but putting some money down at the start of the agreement can be beneficial. The more money you put down, the less you need to borrow from the lender which can be favourable as you don’t need to borrow as much. This helps to reduce the risk to the lender but can also make your monthly payments more affordable.

Prove your income

Lenders want to know how you’re going to pay back your loan and with what money. Car finance can be spread over a number of years so lenders want to know that you can afford to meet each and every payment over the full term. You can use pension income to prove your affordability as it is a regular payment into your account each month. You can prove your income by supplying 3 months’ worth of bank statements during the finance process.

Use a car finance broker

It can be time-consuming to find the right lender for your retired car finance deal. Some mainstream lenders may not accept pension income so it can be worth reaching out to a specialist lender or using a car finance broker. A finance broker works on your behalf to find you the lowest APR deal for your circumstances. You only need to apply with the broker once which helps to save time and they are usually free to use. Brokers have access to multiple finance lenders at once and can help you get the best finance package.

Choose used cars

In some cases, it could be easier to get approved for a used car loan when you’re retired. Used cars nearly always have a lower purchase price than brand new cars which can reduce how much you need to borrow from the lender. A smaller loan amount could then be easier to get approved for and also could mean lower monthly payments for you.

This post is for information only. Please take expert advice before making financial decisions. 

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