What is guaranteed car finance?

Guaranteed car finance is a term that you may already be familiar with. If you’re not, it’s pretty self-explanatory as it literally means you are guaranteed to be accepted for car finance, whatever your circumstances. You may have seen finance companies trying to entice you in by promoting this, however you should always remember – if it sounds too good to be true then usually it is too good to be true.

And in this case, that rule is spot-on. We apologise for raining on your parade, but the honest truth is that no company can actually provide guaranteed car finance and here’s why.

Due to the way in which the car finance application process works, promising a consumer finance using the word ‘guaranteed’, is wholly unethical.  Any respectable lender or broker will want to ensure you can afford your repayments before granting you finance.

To calculate whether or not you can afford your repayments, lenders will examine your credit file for the following:

1. Your address history
2. Employment status and employment history
3. Your electoral roll registration details
4. Missed direct debits
5. Any maxed-out credit cards
6. How you use your overdraft
7. Any CCJs
8. Bankruptcy

If your credit file reports anything to suggest you’re struggling financially, for example, missed bills or bankruptcy, it’s doubtful that you’ll be able to afford your monthly repayments and therefore unlikely that you’ll be accepted for finance.

And if you are accepted by a lender when you’re not able to make your repayments, this can be detrimental to you, causing you to default on your loan or can even result in a CCJ. This will make it much harder for you to be accepted for potential credit in the future.

Don’t be fooled either, by brokers who claim to provide guaranteed finance with a ‘small fee’, as these charges can often cost hundreds of pounds. And even paying a fee cannot guarantee that a lender will accept you - so save yourself the money and go elsewhere.

The law and guaranteed car finance

Any reputable lender or broker will be registered with the FCA (Financial Conduct Authority). The FCA are responsible for the regulation of 58,000 financial service firms and financial markets in the UK, and their regulations ensure businesses work fairly to provide consumers with an honest service. In line with their goals, the 2010 Consumer Credit Act states that advertisements must not contain the expression “loan guaranteed” unless there are no conditions to the credit worthiness of the borrower. Therefore, a business endorsing “guaranteed car finance”, are officially breaching the 2010 Consumer Credit Act.

As with most things, unfortunately not everyone is willing to play by the rules and irritatingly, companies which are in breach will sometimes go unnoticed. However, if a business is caught in breach of the 2010 Consumer Credit Act, they’ll be sure to face a full investigation and enforcement action from the FCA.

Ethical Lending

So, we’ve established that ethically speaking, guaranteed car finance does not exist. But what makes a business ethical when it comes to finance? We’ve outlined a few of our own core values to help give you a better idea:

1. Soft Credit Searches

If a business provides a “Soft-credit search”, it means they view only a snapshot of your credit report as opposed to the full-report. This provides the provider with enough information to calculate the likelihood of you getting accepted by a lender. If they think it’s likely you’ll be accepted and you’re happy to proceed, they will then pass your details on to the lender to run a full credit search. Unlike a hard search, a soft search leaves no trace on your credit file, so you don’t need to worry about your application having a negative impact on your credit score. Needless to say, our customer really like this feature!

2. Expert advice

Car finance can be a tricky business to wrap your head around which is why at Creditplus, you’re assigned your own personal Customer Advisor. The job of a Customer Advisor is to help guide you through the entire application process from start to finish, assisting you with any questions you may have along the way, making the whole thing a doddle. And while we will never push you to make a decision, our Customer Advisors can use their expertise to help you decide which options work best for you and your individual circumstances.

3. FCA Regulated

We’ve explained what the FCA do and why they are important, so be sure to look for lenders that are FCA regulated. Also note that as a Credit Broker, we only work with FCA Regulated lenders.

4. Treating customers individually

When it comes to car finance, there is no ‘one-size fits all’ which is why we work with customers on an individual basis to provide you with the best finance deal for your individual circumstances.