Will car finance affect my mortgage application?
Yes, it can. Car loans are a form of debt and will therefore always have an effect on your mortgage application.

The timeliness of your repayments will significantly affect your credit score, even years after the loan is paid off.
If you’re still paying off a car loan, lenders will consider these payments when assessing whether you can afford to take on a mortgage.
Car finance has the same impact on your credit score as any other type of loan.
Your car finance provider will run a credit check to assess whether you can afford this deal, and this will create a short-term dip in your credit score.
However, as you make timely repayments, your credit score increases because you are showing evidence you are a responsible borrower.
If a repayment is late or you default on the loan, your credit score can plummet. It creates a black mark on your credit score for years, which can make it more difficult to be approved for a good mortgage deal.
As well as assessing your credit report, mortgage lenders will check your recent bank statements to get a solid idea of your regular outgoings.
This is to ensure you can afford to meet your monthly mortgage repayments. If you’re spending £100 a month on car finance repayments, this reduces your spending power in the eyes of lenders. Other regular payments such as car insurance, petrol and maintenance costs will also be considered.
If you can afford to pay the remainder of the debt in full or wait until you’ve paid all your installments, it could benefit your application to do so.
Lenders place a lot of weight on your “debt to income ratio”, so it’s useful to have as little debt as possible when you apply for a mortgage.
We asked some of the UK’s major mortgage lenders about their policies on mortgage applicants with car finance debt. Here is what they told us:
Provider | What it told us | Compare |
---|---|---|
Barclays | We will take outstanding car finance into consideration when assessing affordability. | Compare with broker |
Coventry Building Society | We would take any payments for car finance into account as part of our wider affordability assessment. The monthly payment will be deducted from the customer’s income when ascertaining their net disposable income. | Compare with broker |
Virgin Money | A car finance loan would be treat in the same was as an unsecured loan. The monthly payment of the finance agreement would be included within the affordability assessment. | Compare with broker |
Yorkshire Bank | Applicants with car finance debts will still be considered. | Compare with broker |
A mortgage advisor can help you find a mortgage that matches all your requirements. Tell your advisor about all your debts and they will offer advice on the most suitable lenders, as well as how you can structure your application to give you the best chance of being approved. They will also tell which type of mortgage is most suitable according to your circumstances. Find out more about mortgage advisors and how they can help.
Given that car finance is a type of loan, it’s treated as an impacting factor on your credit score when you apply for a mortgage. So long as your repayments are on time and in full, it shouldn’t negatively affect your chances of securing a mortgage. If you’ve had a late payment, your credit score will dip and that can affect the mortgage deal you’re being offered.
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