Can I Finance A Van With Bad Credit?
Van finance is an alternative method of buying a van without paying for it outright. There's a range of different options available including Finance Lease, Hire Purchase and Business Contract Hire.
The process of applying for van finance is similar to a loan or credit card which means that the finance lender will need to perform a credit check to gauge whether you can comfortably afford the monthly payments you're signing up for. While it may be more difficult to finance a van with a bad credit history, it's still possible.
What Information Is Needed For A Van Finance Application?
When you apply for any type of van finance, you're essentially renting an expensive commercial vehicle and only paying a fraction of the price each month. The finance company is taking a large risk by lending you the money and only being repaid in small monthly increments.
To help them decide whether to take the risk or not, they need to assess your financial situation. In order for them to do this, you need to supply them with certain information. Exactly what they want to see can vary depending on the finance company.
BUSINESS VAN FINANCE
If you're applying for van finance as a business (e.g. limited company, sole trader, etc.) the finance lender will typically ask to see:
- Company details - name, address, company registration number and annual turnover
- Director details - name, date of birth and marital status
- Business bank details - bank name, account number and sort code
In certain circumstances - for example, the business being less than a year old or the applicant having been refused van finance before - you may be asked to provide additional information, including:
- 3 months' business bank statements
- Management accounts
- A director's guarantee
PERSONAL VAN FINANCE
If you're applying for van finance as a private individual, the finance lender will normally ask for:
- Personal details - including marital status and number of dependents
- Address details - at least for the past five years
- Employment details - at least for the past three years
- Bank details - bank name, account number and sort code
- Monthly income and expenditure - all salaries and regular bills
This information is used to verify your identity, determine how you've managed you're existing financial commitments and assess your ability to make payments on time. Additional employment history and information about your monthly income and expenditure may be required if you're not currently in full-time employment.
How To Increase Your Chances Of Getting Accepted For Van Finance With Bad Credit
The information you supply on your van finance application is used by the lender to contact credit reference agencies to determine an overall credit score for your business or you personally. Your credit score is then compared against the lender's threshold to determine if they're willing to loan you the money.
If you've got bad credit, you can try to increase your chances of getting accepted for van finance:
The more money you can put down initially will reduce the amount that the finance company has to lend you which automatically reduces the level of risk you pose. In addition, it means that your monthly payments will also be lower, making your van finance agreement more affordable.
A guarantor is a third party who agrees to make the monthly payments if you can't afford them. The guarantor will need to have a strong credit profile and acts as a safety net for the finance company - it can strengthen your application if you have bad credit.
When applying for van finance with a guarantor, the finance company will usually ask to see the guarantor's financial information as well as yours to determine whether they are financially able to cover any defaulted payments.
Similarly, you could submit a joint application for van finance. This normally happens when one of the applicants has a poor credit history and the other doesn't; increasing the chances of successfully applying for finance for the person with bad credit.
A joint van finance application can only be submitted by people living at the same address. With this option, both the applicant's incomes are combined and both parties are responsible for the monthly payments.
How To Improve A Bad Credit Score
Having a bad credit score will always make it more difficult to apply for any form of finance, but there are ways you can improve your credit score:
- Pay all your bills and invoices on time - set up Direct Debits to have recurring bills paid automatically
- File annual returns and financial accounts on time - keeps you on top of your finances
- Limit the number of loans you're paying - the risk you pose to lenders significantly increases if you have multiple loans at the same time
- Request your credit report - check for any mistakes or discrepancies and if you find any, contact the credit agency to get them changed