Car loans & what you need to know when applying for one

A car loan is a personal loan that is used to help you purchase that vehicle you’ve always wanted.

Have you ever started to search for a new car without really knowing the budget you can spend?

A car loan is an alternative to buying a car on finance. By taking out a personal loan before you start shopping for your new car, you have more freedom to shop around for a new car with a clear budget from the outset, and without being tied to a specific dealer finance deal.

In contrast to a hire purchase agreement, where you have to pay a certain number of instalments before the car becomes your property – a personal loan will allow you to buy a new or used car outright.

If you are considering applying for a personal loan in order to buy a car, there are a number of things you need to take into account first.

The first thing you need to consider when applying for any type of personal loan is what you can afford and your credit history.

According to the Responsible Lending section of the Financial Conduct Authority’s (FCA) Consumer Credit sourcebook, lenders must acknowledge and consider your creditworthiness when assessing your suitability for a personal loan.

The FCA rules state that a borrower’s creditworthiness is determined by a number of different things, including:

• The loan type (in this case, a loan for the purpose of buying a car).
• The amount you’re looking to borrow.
• Your current position from a financial standpoint.
• Your credit history.
• Any existing financial commitments you might have (i.e. do you pay rent to a landlord?).
• Any known future changes in your circumstances that may affect your finances.

Essentially, to be accepted for a car loan, this information needs to be reviewed and approved by the lender in a responsible manner.

People applying for a car loan may have their credit report checked and be asked to provide details of their income so that the lender can form their own conclusion as to whether the borrower can afford the loan and adequately make repayments.

These are just a couple of things that car loan lenders might ask for in order to assess whether you meet their eligibility criteria.

When applying for a car loan, you can also expect the lender to ask you your date of birth, residential address, residential status, employment details, and the details of your personal bank account to help them check your identity and creditworthiness. As a result, it’s probably wise to have these things to hand when applying for a car loan online.

When you request an instant quote for a Shawbrook car loan, we assess your credit background in a way that doesn’t leave a mark on your credit file that is visible to other lenders. This is called a soft credit search.

We want you to get the right rate for you and believe you shouldn’t be penalised for shopping around in order to make a well-informed decision.

In addition to this - if you are eligible, we’ll let you know your guaranteed personalised rate from the start. Basically, you’ll know exactly what you’ll pay before proceeding with the full application.

These principles are built on the five promises outlined in the Shawbrook Bank Transparency Charter – and forms our commitment to be honest, upfront, open, clear and fair with our customers.

When it comes to Shawbrook car loans, you could borrow from £1,000 to £50,000 to help purchase the vehicle of your choice.

However, in order to assess your eligibility for a loan you will also have to satisfy some basic criteria which includes being:

• Aged 21-75.
• A UK resident for at least 3 years.
• On an annual income of at least £15,000.
• An owner of a UK personal bank account.

If you do meet the basic criteria there are certain things you will need to know – or have ready in front of you to complete the process and get your quote.

• Your address history for the last three years and residential status (owner occupier, living with parents, council tenant or tenant).
• Contact email address and phone number.
• Employment type (employed, student, retired, part time, temporary employment, unemployed, self-employed or armed forces).
• The month and year you first started working (if in active employment).
• Your gross annual income.
• Loan amount you wish to borrow and the term you would like to borrow the money for.

Once you have provided these details, we will then conduct the soft search to inform whether or not you are eligible for a car loan, without leaving a footprint on your credit rating.

If you’re happy with the quote offered, you can proceed with the application. We’ll ask you to provide a bit more information, such as your bank details and you will need to accept the quotation and allow us to complete a full credit search to proceed with the application. If we can verify all the information provided, we will then send the e-signature pack with the loan documents for you to review, sign, and return. Once signed, the money will be in your account within 3 working days.

If you need support in your application for a car loan, then don’t hesitate to get in touch. Shawbrook Bank is recognised as a Feefo Gold Trusted Service – and we’re more than happy to help you through the process.

Head over to our car loans page to explore more about what we can offer you in greater detail and get an instant personalised quote online today.