The popularity of car finance is on the rise and for some people, getting a car on finance has never been easier! But why are more brits choosing to get their next car on finance than ever before? Deciding whether to get a car on finance mainly depends on your financial situation and the options available to you. For example, it can be harder to get accepted for car loan if you have a low credit score but its not impossible! There are a few ways in which you can improve your chances of getting approved for finance. Its also worth exploring the different types of car finance deals available as some may be more suited to you than others. Let’s take a look at the most popular options and how to get approved!
Check your credit file
Anyone who has a car on finance will more than likely have had to pass a credit check first. You should be wary of any companies who are offering guaranteed finance as it can misleading. If you have credit problems, then car finance with no credit check may seem appealing however you may be landed with high APR rates as you can be seen as more of a risk to lenders. Before applying for any type of loan or finance you should check your own credit score first. You can even help to improve your credit score by making sure your information is accurate and up to date, fixing any mistakes on your credit file and disassociating yourself from financial links who have bad credit. Putting yourself in the best position before applying for finance can help you to get approved.
Car finance with bad credit
It used to be a common misconception that people with bad credit can’t get approved for finance. A recent customer survey from Refused Car Finance showed that over 60% of people think that you can’t get car finance with bad credit! However, there are many specialist bad credit car finance companies who can help you to get approved for an affordable finance deal. If you want to increase your chances of getting accepted, there are a few easy ways in which you can. You could consider registering on the electoral register to make it easier for lenders to verify who you say you are and your living address. If possible, you should also try to clear your existing debts before applying for more finance or credit. If you have existing bills to pay, you should make sure you make any repayments on time and in full to show lenders that you can be trusted to pay back their potential finance.
New cars vs used cars on finance
There are many options for people to get both a used car and a new car on finance. When finance first came about, it was only available on new cars. However, nowadays there are many options available to get a used car on finance. You can some great deals on new car loans, but many people don’t think it is as worth it because of the rate at which some cars depreciate. Car depreciation is the difference between a cars value when you buy it and the value when you come to sell it. Some cars can depreciate as much as 50% in their first few years so when you come to sell it on, it won’t be worth it. This is why many people choose to finance a used car instead. Used cars cost less in the first instance too so you can usually get a more affordable finance deal.
Types of car loan agreements
There are a few types of car loan which are most popular in the UK. These include a personal loan option, Hire purchase and Personal Contract Purchase.
A personal loan can be used for pretty much anything, but you can take out a personal loan to buy a car. A personal loan can be obtained from a bank or building society but are usually more accessible to people with good credit scores. You apply for a certain amount and if accepted it will be deposited into your bank account. You can then use the money to get the car you want. You can get a car from a dealer, or a private seller and you will own the car outright from the start of the agreement.
Hire Purchase is secured against the car you want. This means, if you fail to meet the repayment deadline each month, the finance company have the power to take the car off you. There are no mileage limits or damage charges in a hire purchase loan but you won’t own the car until the final payment has been made. You can also use a car finance broker to help you secure a hire purchase deal. A car finance broker acts as the middleman between you and the finance lender. They work with a wide range of lenders and match you up with the most suitable one. You can then take your finance deal to any FCA approved dealership to get the car you want!
A personal contract purchase is similar to a hire purchase deal but typically allows you to have lower monthly payments. This is because you aren’t paying back the full cost of the car but part of the car. This means at the end of the deal you have 3 options. You can either hand the car back and walk away, use the value of the car to get a newer car on a PCP deal or pay the final balloon payment and keep the car. You should note that at the start of the agreement, you will set an annual mileage ad promise to take good care of the car. Extra mileage can result in additional charges.