If you’ve had to take a payment holiday, you might be concerned about whether you’ll be able to take out finance to buy a new car. There are multiple eligibility factors when it comes to being accepted for car finance; your credit report being looked at as part of the process.
Under normal circumstances, a payment holiday might affect your credit rating, which in turn could affect your ability to get car finance. However, due to the COV-ID 19 epidemic, the Government will now allow lenders to offer 3-month payment holidays to those in financial difficulty: authorised payment holidays won’t damage your credit score or negatively impact your credit report.
Getting finance while on a payment holiday:
You could still get car finance during, or after a payment holiday (as a result of the coronavirus epidemic), assuming you meet the other set criteria. Authorised payment holidays shouldn’t affect your credit report; however they could impact affordability which could influence whether you’d be accepted for finance.
You’ll need to think about:
- Providing proof of income e,g. with bank statements. This is to demonstrate you have the regular income to make the necessary repayments.
- Financial documents. You’ll need to report your normal expenditures; this is also to determine whether you can afford to make repayments.
- Personal documents. Items such as your driving license for identification, and address history.
- Your budget. How much do you want to borrow? How much can you afford to repay each month?
- The type of car finance. There are a variety of types of car finance, you can see more here.
- Your credit rating and report. Lenders will look at your credit report when deciding to accept an application for car finance. If you’re worried about your credit score, here at Red Potato we specialise in helping people with bad credit get car finance.
As mentioned above, if you’ve had to take a payment holiday due to financial impact caused by the coronavirus, this won’t negatively affect your credit report, meaning as long as you can make repayments and meet other criteria set, the payment holiday shouldn’t affect whether you can buy a new car.
- When looking at how payment holidays could affect you purchasing a new car, you’ll need to consider affordability. If you’ve needed a payment holiday to help with other credit commitments, like a loan or a mortgage, taking on a new financial commitment might not fit into your budget.
- For many households a vehicle for transport can be essential. Households might see some earners furloughed as a result of the coronavirus, or out of work and on a reduced income, and other household earners still working, so might still need transport. Others might need a vehicle to attend appointments, or for other personal reasons.
- If you’re getting a new car on finance while on a payment holiday, you’ll need to account for your increased repayments for the credit agreements you took a holiday from in your future budget.