Can I get car finance with mortgage arrears?

Sam Wooller, Customer Experience Communications Manager, Friday, 12 May 2023
Updated: Monday, 18 September 2023

If you’ve missed mortgage payments in the past, it won’t stop you from applying for car finance, but it might affect your chances of getting approved.

Read on to find out more about how mortgage arrears affect your ability to get car finance, how it might affect your credit score, and some of the things you could do that might improve your chances.

What are mortgage arrears?

When you take out a mortgage, you agree to make monthly repayments to the lender until you’ve repaid the mortgage in full.

This total includes interest which will be either fixed or variable, depending on your type of mortgage. Once you have fully paid off your mortgage, the property will legally be yours.

The average length of a mortgage is around 30 years. Between taking out your mortgage and paying it off, your circumstances could change, and it might be trickier paying off your mortgage some months more than others.

If you don’t keep up with your monthly mortgage payments, you will fall into arrears. While you are in mortgage arrears you may be charged extra in line with your mortgage agreement.

Your options when in mortgage arrears

We can’t give any advice about which option would be best, as it depends on your circumstances. If you’re unsure, contact your mortgage provider and they can discuss the options available to you.

Below is a list of possible support options that your mortgage lender may be able to offer to you:

  • Pay off your arrears in instalments: your lender may agree to an alternative payment plan to repay your arrears over a few months in addition to your regular repayments.
  • Extend the mortgage term: extending the term of your mortgage can reduce your monthly repayments, making them easier to cover.
  • Arrange government mortgage help: Your lender can arrange assistance to pay your mortgage through Support for Mortgage Interest (SMI).
  • Change to an interest-only plan: This temporary payment plan allows you to pay only the interest on your mortgage for several years. At the end of this period, you must pay the original mortgage sum.
  • Take a payment holiday: A payment holiday allows you to miss one or two payments on your mortgage. This gives you a chance to iron out any financial difficulties, but you must make up the difference before the end of your payment term.
  • Agree to an assisted voluntary sale scheme: If you decide you can’t afford your mortgage repayments and would prefer to sell, the lender may help you to sell your home. You’ll then get extra time to pay your arrears pending the sale of your property.

There is also support available to you if you’re experiencing financial difficulties and are struggling to pay your mortgage. There are some not-for-profit debt organisations that could offer advice and support. These include StepChange, which provide free and impartial debt advice, and MoneyHelper which have online resources to help manage your money.

How can mortgage arrears impact your ability to get car finance?

You can still apply for car finance when you’ve had or have mortgage arrears, but they usually show on your credit report, which may decrease your chances of being approved for car finance.

If you’ve fallen into arrears with your mortgage, or have had arrears in the past, this will usually affect your credit score. You can still apply for car finance, but current or previous mortgage arrears may impact your chances of being approved.

A responsible lender will use a credit check when deciding whether they’ll approve an application for car finance. Missed payments on your mortgage will show up on a credit check and could mean lenders see you as being higher risk to lend to.

Depending on the lender, they’ll carry out either a soft or hard credit check when you apply for finance, both types of checks let the lender see your credit report. The difference is that a soft check isn’t visible to other companies, so it has no impact on your credit score. A hard check can negatively impact your credit score.

If you have bad credit because you have (or have had) mortgage arrears, you may need to use a specialist lender such as Moneybarn. We’ve helped thousands of people up and down the UK get the car they need to get around.

Representative 30.5% APR.

What can you do if you have mortgage arrears but need car finance?

Buying a new car is an exciting time, but if you’re looking to get a car on finance, make sure you consider all the costs involved. You could use a car finance calculator to see how much your finance payments might be. You should also consider the costs of running and maintaining your car, such as fuel, servicing, insurance, and road tax.

There are also some things you could do that might improve your credit score, which can help your chances of getting car finance:

  • Check your credit report and make sure all the information is up-to-date
  • Register for the electoral roll if you haven’t already
  • Try to ensure you have no late or missed payments for your mortgage or other bills.

Your credit report is important because it is one of the factors that car finance lenders use to decide if you’re eligible for car finance. For more information, see our guides to learn more about credit:

If you’ve missed mortgage payments in the past, it won’t stop you from applying for car finance, but it might affect your chances of getting approved.

Read on to find out more about how mortgage arrears affect your ability to get car finance, how it might affect your credit score, and some of the things you could do that might improve your chances.

What are mortgage arrears?

When you take out a mortgage, you agree to make monthly repayments to the lender until you’ve repaid the mortgage in full.

This total includes interest which will be either fixed or variable, depending on your type of mortgage. Once you have fully paid off your mortgage, the property will legally be yours.

The average length of a mortgage is around 30 years. Between taking out your mortgage and paying it off, your circumstances could change, and it might be trickier paying off your mortgage some months more than others.

If you don’t keep up with your monthly mortgage payments, you will fall into arrears. While you are in mortgage arrears you may be charged extra in line with your mortgage agreement.

Your options when in mortgage arrears

We can’t give any advice about which option would be best, as it depends on your circumstances. If you’re unsure, contact your mortgage provider and they can discuss the options available to you.

Below is a list of possible support options that your mortgage lender may be able to offer to you:

  • Pay off your arrears in instalments: your lender may agree to an alternative payment plan to repay your arrears over a few months in addition to your regular repayments.
  • Extend the mortgage term: extending the term of your mortgage can reduce your monthly repayments, making them easier to cover.
  • Arrange government mortgage help: Your lender can arrange assistance to pay your mortgage through Support for Mortgage Interest (SMI).
  • Change to an interest-only plan: This temporary payment plan allows you to pay only the interest on your mortgage for several years. At the end of this period, you must pay the original mortgage sum.
  • Take a payment holiday: A payment holiday allows you to miss one or two payments on your mortgage. This gives you a chance to iron out any financial difficulties, but you must make up the difference before the end of your payment term.
  • Agree to an assisted voluntary sale scheme: If you decide you can’t afford your mortgage repayments and would prefer to sell, the lender may help you to sell your home. You’ll then get extra time to pay your arrears pending the sale of your property.

There is also support available to you if you’re experiencing financial difficulties and are struggling to pay your mortgage. There are some not-for-profit debt organisations that could offer advice and support. These include StepChange, which provide free and impartial debt advice, and MoneyHelper which have online resources to help manage your money.

How can mortgage arrears impact your ability to get car finance?

You can still apply for car finance when you’ve had or have mortgage arrears, but they usually show on your credit report, which may decrease your chances of being approved for car finance.

If you’ve fallen into arrears with your mortgage, or have had arrears in the past, this will usually affect your credit score. You can still apply for car finance, but current or previous mortgage arrears may impact your chances of being approved.

A responsible lender will use a credit check when deciding whether they’ll approve an application for car finance. Missed payments on your mortgage will show up on a credit check and could mean lenders see you as being higher risk to lend to.

Depending on the lender, they’ll carry out either a soft or hard credit check when you apply for finance, both types of checks let the lender see your credit report. The difference is that a soft check isn’t visible to other companies, so it has no impact on your credit score. A hard check can negatively impact your credit score.

If you have bad credit because you have (or have had) mortgage arrears, you may need to use a specialist lender such as Moneybarn. We’ve helped thousands of people up and down the UK get the car they need to get around.

Representative 30.5% APR.

What can you do if you have mortgage arrears but need car finance?

Buying a new car is an exciting time, but if you’re looking to get a car on finance, make sure you consider all the costs involved. You could use a car finance calculator to see how much your finance payments might be. You should also consider the costs of running and maintaining your car, such as fuel, servicing, insurance, and road tax.

There are also some things you could do that might improve your credit score, which can help your chances of getting car finance:

  • Check your credit report and make sure all the information is up-to-date
  • Register for the electoral roll if you haven’t already
  • Try to ensure you have no late or missed payments for your mortgage or other bills.

Your credit report is important because it is one of the factors that car finance lenders use to decide if you’re eligible for car finance. For more information, see our guides to learn more about credit:

 
Sam Wooller, Customer Experience Communications Manager
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