Thinking about changing your car, and wondering how to get started, or what the best way forward is? We’re here to help. Getting a loan decision is straightforward with a little advanced planning. If you’re worried about your credit, there are steps you can take to move your credit in the right direction, and help you get the loan you’re looking for.
Let’s have a look at what lenders require in order to offer loans, and easy ways you can meet those requirements in the three months before you apply for finance.
1) Repayment Capacity.
Your repayment capacity is the money “left over” and available to spend after paying monthly financial commitments, plus any existing loan/s from monthly income. To show your repayment capacity, you’ll want to create a payment trail for your regular outgoings. This means paying your rent via bank account; making regular payments into a savings account; and monthly repayments toward any existing loans.
Example: if “left over” figure normally equals €250 this is your maximum repayment capacity.
2) Direct Debit History
A direct debit is a commitment to pay for something each month on a specific date. Its most common usage is when paying utility bills, loans and mortgages. It can also be used for a variety of other purchases whenever agreeing to pay for an item over a specific term. A poor or positive record of paying direct debits on time is a key decision point when lenders make loan decisions. Make sure to keep enough money in your checking account that your direct debits can come out on their scheduled date, and aren’t putting your account into overdraft or accruing referral fees (see below).
3) Referral Fees
Referral fees are incurred when cheques, withdrawals, direct debits or standing orders are presented for payment on an account and, when paid, place the account in an unauthorised overdraft. These fees are sometimes evidence of poor financial planning. They could also indicate a need to develop a better and closer relationship with a bank as authorised overdrafts are available and would help avoid referral fees.
To avoid referral fees, try to maintain a healthy balance in your checking account, even if this means making smaller payments into your savings account. This will show good financial planning, which will put you in a better position to secure a loan.
4) Credit Rating
A credit rating is included in a credit report provided by the CCR whenever any company who provides you with credit and repayment options requests it. The highest score on a credit rating is 581. This means that you are one of the lowest risks to lenders and are highly likely to repay on time. The lowest score on a credit rating is 224. This means that you are one of the highest risks to creditors and you are highly likely to not repay credit on time.
To improve your credit rating, be sure to pay your loans, credit card bills, and any other regular payments on time. If you’re not sure if your credit rating will affect your ability to secure a loan, you can request a copy of your credit report, free of charge, by going to www.centralcreditregister.ie/borrower-area .
A credit report, including credit rating, normally contains the following information:
- Name, date of birth, address(es) used in relation to financial transactions
- Names of lenders and account numbers of loans currently held, or that were active within the last five years.
- Repayments made or missed for each month on each loan, including the following:
- failure to clear off any loan
- loans that were settled for less than owed
- an indicator that a lender may be taking legal action.
Note: It is possible the CCR does not have credit records in relation to you. This occurs if you have had no active loans within the past five years or your data has not been registered with ICB by the relevant member. Access to credit reports is granted to lenders when loan applications are completed and signed.
5) Gambling Record
When lenders carry out repayment capacity checks they look at bank statements from the previous 3-6 months. Gambling expenses on a bank statement during this period will be seen by a potential lender. Gambling is not illegal and does not appear on a credit score.
However, making a regular habit of spending on gambling may be considered a risk factor, which might make you less attractive to lenders because of a risk that a borrowers may gamble too much money and be unable to repay a loan. If you know you’re looking to secure a loan in the next three to six months, it’s safest to refrain from gambling during that time period.
6) Consumer Rights
Whenever a loan is approved and used by the borrower s/he is protected by all Consumer Credit Legislation and Codes that contain specific rules that apply when lenders advertise and sell loans. There are specific rules that apply to credit agreement in consumer credit legislation – the Consumer Credit Act 1995 and the European Communities (Consumer Credit Agreements) Regulations 2010. Lenders regulated by the Central Bank must comply with the Consumer Protection Code 2012.
Vendor Finance ensure that Consumer Rights are upheld to the highest standards at all times.
7) Vendor Finance At Your Service
We know there is a certain amount of stress involved when you are looking for a car loan – but it can also be exciting! Once you’ve browsed your choice of cars and come to a decision, the loan process can be quick and straightforward. At Vendor Finance, we’re here to make it as simple and hassle-free as possible. Once you provide us with requested information upfront, we simply take it from there, handling all of the paperwork.
8) Car Dealer Network
When you find the car you want to buy, we can work with your dealer of choice and close the deal on your behalf, using your approved loan. We partner with most dealers throughout Ireland already ensuring whatever your choice of car or dealership, we are with you all the way.
The Last Word.
Avoid Surprises & Financial Shocks
Before looking for a car or applying for a loan, read the tips above, think about what you need, invest some time in planning ahead and please feel free to call Vendor Finance for a flexible and friendly response backed up by advice and support!
We hope that this information is valuable to you, and helps you make easy adjustments that will put you in a good position when applying for car finance. Our online application process only takes a few minutes once you have your documents in order, and we’ll typically have a decision for you within 24 hours or less!