Car Finance On Benefits

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Rates from 7.9% APR. Representative APR 22.09%

Representative Example: Borrow £6,000 with £1,000 deposit over 48 months with a representative APR of 22.09%, the monthly payment would be £152.49, with a total cost of credit of £2,319.37 and a total amount payable of £7319.37. CarLoans UK is a broker not a lender.

What Is Car Finance On Benefits?

Buying a car is a major expense and not everyone can afford to own one outright. Because of this, many people will opt to purchase a car through car finance. Car finance allows you to spread the overall cost across more manageable monthly repayments, making buying a car more achievable. To get car finance you will need to make an application. While it can be more difficult, it is possible to get bad credit car finance on benefits.

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Representative Example: Borrow £6,000 with £1,000 deposit over 48 months with a representative APR of 22.09%, the monthly payment would be £152.49, with a total cost of credit of £2,319.37 and a total amount payable of £7319.37. CarLoans UK is a broker not a lender.

How Does Car Finance Work?

The Initial Deposit

This step isn’t always required. Although, placing down a deposit when completing a car finance agreement is highly recommended.

Repayment Plans

Depending on the agreement that has been put in place for example HP, PCP & CS, your repayment plan may vary.

Contract Completion

Upon completion of your contract, you will then have a number of different options available to you. Which we will state below.

Everything You Need To Know With Car Finance On Benefits

It’s a general assumption that being on benefits or having bad credit, stops you from obtaining car finance. The general thought is that if you are on benefits, your income can’t sustain the payments. Contrary to this, many people receiving benefits are also holding down a steady job.

Lenders are notoriously risk-averse and tend not to want to lend money if there’s a chance they won’t receive their repayments. Those on benefits tend to have a more limited income and may find it hard to meet repayments. Because of this, they could fall into a risky category for lenders which results in higher interest fees. Less scrupulous lenders could exploit borrowers, so it is always best to shop around for the best deal.

According to the Department of Work and Pensions, there were 20 million people claiming benefits as of 2019. You will not be the only person seeking car finance on benefits.

Some car finance companies will look at your overall finances, including the amount you receive for benefits. Bad credit isn’t always a bar either; lenders may be understanding about County Court Judgments, debt and defaults, and in some cases unemployment. At Car Loans UK, we have made the application process as simple and stress-free as possible.

Your overall spending would be grossly over-inflated by extortionate interest charges, making keeping up with repayments harder.

A very low, or non-existent interest rate is also something to watch out for; this may mean the cost of the loan is bundled into the overall price of the car itself. This makes it much harder to determine whether the car is of good value. To make sure, it is worth taking the time to get other quotes to compare. Put in the same information such as a type of finance, deposit, repayment length, etc.

A guarantee

It is an offense for a lender to say they can waive the results of a credit score and guarantee a loan as set out in the Consumer Credit Act, 2010. If they are happy to break these rules, the chances are they will not follow other equally important regulations. Avoid these lenders as they could cause you no end of trouble.


If a company charges you an application fee, it may be best to go elsewhere. Often, even when it’s stated the fee is refundable, in reality getting the money back can be hard. Some lenders will charge up to £300.

It is illegal to deny you your rights to a vehicle if you are on benefits due to your physical or mental condition. If a lender ever uses this reason for not going forward with your application – avoid them. If we are in control of your application here at CarLoansUK, we will take all of the necessary steps if we ever come across a lender of this nature. In saying this, most lenders are aware of these rules and will be sure to stick to them. Especially those lenders in our database.

Car Finance Comparison In More Detail

At CarLoansUK, we provide numerous amounts of different finance options across our car finance brokerage site. Which then allows you to find the best way to pay with ease. Including but not limited to PCP Car Finance, HP Car Finance or No Deposit Car Finance just to name a few. Because CarLoansUK has got you covered,  don’t believe us? Then take a look at our excellent trust pilot reviews and see for yourself.

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Frequently Asked Questions

A car finance broker is essentially a middle man between the customer and the lender. A car loan finance broker will take care of all of the complicated paperwork as well as the negotiations with lenders. Which essentially means you can sit back and relax knowing that the broker is fighting your corner to get you the best deal possible. All whilst making your car finance journey as stress free as possible. Not only this but car finance brokers such as ourselves, also have deals that aren’t usually available to the general public, and to top it all off. Car finance brokers will actually charge the dealerships instead of the customer.


If you have been refused by other brokers in the past, all is not lost. At CarLoans UK we have a number of finance options for those with bad credit scores. However, you should be aware that when you apply for car finance through us, a hard credit check will be conducted, which may in turn have a negative impact on your credit score. Especially if these credit checks have been done in quick succession. So therefore it is recommended that after being declined for car finance, you should wait between 3-6 months before applying again.

If you are struggling to keep up with your car finance repayment plan. There are a number of options available to you. It is of great importance that you obtain free independent advice from one of the following charities/organisations. 

Money Advice Service

National Debt Line

Citizens Advice

Initially, applying for a car loan usually will have a negative impact on your credit score. Although, you should be aware that if you make your car loan repayments on time. This will most likely have a positive impact on your credit score.


APR stands for annual percentage rate and is the total amount charged for the lend. There are, however, two different types of APR.Exact APR in short means that the rate that is shown to you, is the rate that you will get. Whereas, representative APR however, means that 51% or more of the people who apply for the finance will receive that rate. What this means is that customers with poor credit scores could see a higher APR.

Representative APR is, for the most part, used to advertise the companies rates. After you have provided all of the necessary information to the lender, they can then offer you your exact APR rate.

What is it?

Gap insurance stands for Guaranteed Asset Protection.

Essentially gap insurance is, is a form of insurance that is designed to cover the difference between the amount your insurance provider pays out in the event of your vehicle either being written off or stolen and the price that you paid for the vehicle. You should however be aware that gap insurance works alongside your standard car insurance and is in no way a substitute.

So when is gap insurance needed?

Gap insurance can be worthwhile in several ways. Firstly, if you have taken out a big loan to buy your car. Gap insurance would be beneficial as mentioned previously if your car is stolen or written off. This is because the gap will pay off the outstanding finance.

As well as this, gap insurance could also be beneficial if you are worried about your car depreciating. A brand new car will lose between 15-35% of its value in the first year. Therefore gap insurance can help you get a bigger payout if your car is written off after it has already depreciated.

Where can I get gap insurance?

Comparing gap insurance quotes has never been easier thanks to Bright Compare!

If the vehicle is faulty on delivery, you can simply refuse the car and send it back to the dealership.

You can, however, you will have to ask the finance company for permission prior to making any sort of modifications.

Our smart online system is quick and simple to use. It takes just a few minutes to complete with a few personal details. Once that part has been processed, it will go to a decision stage. Before completion, you will need to add in the details of the car you are hoping to purchase. If you get accepted for car finance, there is no obligation to complete the process.

While being on benefits isn’t a bar to obtaining car finance, there are a few factors that can have an effect on your eligibility:

Late repayments: falling behind on payments for other debts will show in your credit score. This could have a negative effect on an application for a car finance loan. It might be worth seeing if you can get back on schedule with payments to demonstrate that you are making your instalments on time.

IVA: if you have an Individual Voluntary Agreement lenders may require permission in writing from the person dealing with your insolvency before a loan can be agreed. A settled IVA will not necessarily affect you obtaining car finance on benefits.

Bankruptcy: if your bankruptcy has been discharged, you can still apply for car finance. However, if it is still current any application is unlikely to be successful.

County Court Judgments (CCJ): CCJ’s are not always a bar to obtaining car finance, so it is always worth making an application.

Unemployment: car finance is available if you are unemployed and receive DLA or PIP

Each person seeking car finance on benefits has their own individual requirements and repayments are worked out accordingly. Car finance repayments are factored in once everything else has been accounted for. It is worth taking the time to see if you are eligible for car finance.

There is also a useful car finance calculator which will help you work out the possible amount of monthly repayments, depending on the loan amount and the length of the repayment period.

It is worth taking the time to consider the extra costs involved in car ownership. As well as affording the payments for the car, you will also need to pay for the tax, insurance, fuel and any other maintenance requirements. Different cars will incur different costs, so it’s recommended that you think carefully before deciding on a particular car. For example, a car with a more powerful engine may use more fuel or a car with extra modifications may incur higher insurance fees.

Loan applications
Making too many applications can have a negative impact on your credit rating; it will look as though you desperately need credit and may be borrowing beyond your means. Being aware of the difference between a hard and soft search is helpful.

Interest rate – high or low?
The Money Advice Service advises taking caution about borrowing from lenders who feature highly when searching for particular search terms such as ‘loans for people on benefits’. There may be some lenders who exploit people’s financial situation and charge extortionate rates of interest. A typical rate of interest would be somewhere between 10-20%. Some exploitative companies could go as far as charging 500% up to 4000%.

Here at Car Loans UK, we cater for many types of benefits including:

  • Personal Independence Payments (PIP)
  • Disability Benefits
  • Universal Credit
  • Child Benefits
  • Housing Benefits
  • Industrial Injury
  • Disablement Benefits

We do not accept car loans on the following benefits:

  • One-off bonuses
  • Unemployment Benefits
  • Jobseekers Allowance
  • Maternity Pay

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Rates from 7.9% APR. Representative APR 22.09%

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CarLoansUK © 2022 All rights reserved

Car Loans UK is a trading style of Wallace Bohen Ltd, a company registered in England and Wales. (Company number: 12382512, Registered Address: 4th Floor, Kingsgate, Wellington Road North, Stockport, Cheshire, SK4 1LW. We act as a credit broker and not a lender and are authorised and regulated by the Financial Conduct Authority for consumer credit FCA no.928674. CarLoansUK can introduce customers to a limited number of finance providers based on overall credit profile and may receive a commission for such introductions, this will not impact the rate you are provided. We do not charge a fee to the customer for arranging the finance. Written quotations on request. All finance subject to terms and status Data Protection Registration No.ZA766848.

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