Car finance, as with most financial products, brings with it a whole encyclopaedia full of myths and misconceptions. From the universally feared ‘credit blacklist’ to the promise of ‘guaranteed’ acceptance, some are fuelled by misunderstanding and miscommunication, but others simply by the complex nature of finance.
Setting out to compile a list containing every myth and misconception relating to car finance and car insurance would likely result in it becoming a contender for the world’s longest list. Some car insurance myths have been debunked and you could have a look at Your comprehensive car insurance about that. Here I have compiled a list of the five most commonly cited misconceptions about car finance, and here they are.
Guaranteed car finance
Few things in life are guaranteed, but visit any one of the countless vehicle finance websites and you will likely be met with what appears to be an offer of guaranteed car finance. It might sound great, especially if you have struggled to obtain acceptance of credit, but the good old saying ‘if it looks too good to be true, it usually is’ comes into play; yes, you guessed it, it’s nothing more than a marketing ploy, that’s according to a leading vehicle finance broker.
Imagine a world where every individual was guaranteed to get car finance regardless of their personal circumstances? Aside from it being a prime example of irresponsible lending, this kind of business model simply wouldn’t be financially viable in the long run, default rates and repossessions would rocket as would the number of individuals with blemishes on their credit files, likely causing outrage and regulator intervention.
The Credit Blacklist
One of the most unusual yet perfectly plausible myths is the ‘credit blacklist’, bringing with it the suggestion that banks, financial institutions and government organisations work incognito to compile a database of individuals who have in the past defaulted on their financial commitments. Those individuals are then supposedly prevented from obtaining any new credit, whether it is in the form of an overdraft, credit card or car finance.
So, if you ever suspected you were on a credit blacklist, you can relax because the credit blacklist simply doesn’t exist. If you have had a finance application declined, it’s more than likely down to the lender’s own criteria not being met and not as a result of a coordinated attempt to prevent you from obtaining credit.
You must have excellent credit
Having a credit report status of ‘very good’ or even ‘excellent’ will result in lower interest rates and more affordable finance packages, but the truth is even those with the worst credit in the world stand a pretty good chance of being accepted.
A credit report is used to assess an individual’s suitability for a given finance product, but many other factors such as the ability to repay the finance and employment status are also taken into consideration. In addition, the introduction of the ‘payment box’ has left lenders willing to lend to individuals who would have previously been considered too high a risk.
You must be over the age of 21
Surprisingly, there’s a common belief that in order to obtain a car finance approval you must be over the age of 21. However, in the eyes of the law, an individual is legally able to enter into a finance agreement from the age of 18. Of course, lenders still have the ability to only offer their financial products to those over the age of 21, and some do, but there are many lenders out there who will consider applications from those aged under 21, but over the age of 18.
Someone else’s debt against my address will affect my application
There are countless examples of misinformation regarding debt being recorded against a particular address and that debt then affecting any future occupant’s ability to obtain credit. It’s true that credit checks were once carried out against an address, but this changed many years ago.
Nowadays a credit check is carried out against an individual and any outstanding debt is recorded against their name rather than against the address they occupy. The only way that debt recorded to an individual at a particular address could affect you after they have moved out is if you are financially connected through a shared bank account, joint loan or other financial agreement.