At Car Credit Expert we aim to make your search for car finance quick and easy, through our partnership with a selection of the Uk’s leading finance companies. Working with the country’s top lenders they will provide suitable and competitively priced car finance, whatever your circumstances and credit history.
There are a wide range of finance options available, so how do you choose the most cost-effective solution for you?
Here we discuss the your options …
But firstly, what is car finance?
- Car finance is simply that – it gives you the chance to buy the car you want now, rather than having to spend what might be a very long time saving up to buy it.
- Although the use of your savings is, of course, one option, there are also a number of alternatives – such as personal contract purchases (PCPs), hire purchase (HP) agreements, guarantor loans and personal loans.
- Because of this choice, it’s important that you understand the different options so you can choose the car finance option that is most suitable for you.
What is hire purchase (HP)?
- It is one of the most popular forms of finance
- This allows you to buy the vehicle by paying regular, fixed monthly installments over an agreed period of time – typically up to a maximum of five years.
- If your circumstances change and you are able to find the outstanding balance still to pay on the car, you may ask the hire purchase lender for a final settlement figure and the vehicle becomes yours on payment of this.
- It is important to remember that you do not actually own the car until the final payment is made, so if you default on the repayments it may be taken back from you – or “repossessed” • Interest rates can be lower than other types of car finance, and might suit those with a less than perfect credit history.
What is a personal contract purchase (PCP)?
- This might be seen as one of your more flexible options – giving you the use of the vehicle for a fixed period of time, after which you may simply hand it back or purchase it outright.
- With this option, you make regular monthly payments over a period typically extending for 36 or 48 months.
- During this time, you are effectively leasing the car, rather than buying it, so the fixed monthly instalments are generally relatively low
- Only at the end of the agreed period you make the decision as to whether you want to give back the vehicle or buy it outright – by making what is usually known as a “balloon payment” (a single, one-off, final payment).
What is a guarantor loan?
- If you have a bad credit history and find it particularly difficult to secure finance, you might want to consider a guarantor loan.
- This involves you finding someone else – a friend or parent, for instance – to guarantee repayment of the loan in the event that you default on the regular monthly installments
- As with other types of loans for car purchases, the monthly repayment amount is fixed and spread over a fixed period of time
- Provided that you keep up the repayments on this type of loan, you may be able to repair or restore your damaged credit rating
- If you default on those repayments, the guarantor will need to make the outstanding balance
- Lenders typically take a greater risk in lending to individuals backed by a guarantor, so the repayments here may be higher than other forms of credit.
What is a personal loan?
- Banks and other financial institutions offer personal loans that are typically unsecured
- Credit history is especially important to those offering unsecured personal loans, so you might find it difficult to raise such finance if your credit record is less than perfect
- As the loan is unsecured, you are free to sell the car at any point, but you must still make the monthly repayments
If you have set your sights on the purchase of a car, you may have a number of different options for raising the necessary finance – and hopefully the information above can help you to make the right decision. Remember, that with finance agreements of any form, you are committed to making repayments of the agreed amount over the term of the loan. If you default on those repayments, the vehicle may be repossessed; you might be sued for the recovery of any outstanding debt; and any guarantor you persuaded to back your loan is certainly going to be less than happy with you. Defaulting on any form of borrowing will most likely adversely affect your credit rating and make it considerably harder to get credit in the future. That is why it is so important to ensure that you get the most appropriate solution for you, one where you can comfortably afford to meet the repayments on your car and at a cost-effective price.