Let’s face it, paying cash for your next car or first car would be ideal. You get to own the car outright and do with it as you please and you don’t have to pay any interest! However, for many people car finance is affordable way to spread the cost of owning a new car into affordable monthly payments. You can also usually also get a better car than you would have if you paid with cash. So, if you’ve never taken out car finance in the past or have previously been refused car finance then what do you need to know before you apply for finance?
You may be better suited to a certain type of finance
Many people are still under the misconception that there is only one type of car finance and it’s available at a car dealership. However, there are a few ways in which you can fund your next car. In the UK, the 3 most popular types of car finance are a personal loan, Personal Contract Purchase and a Hire Purchase car finance deal. Each type of finance has the same foundation where you get accepted for a certain amount and then pay it back in monthly instalments with added interest to an agreed term. Each type of car finance deal has different terms and if you’re looking to take out finance for the first time its best to brush up on your knowledge beforehand.
You can still get finance with bad credit
Car finance is never guaranteed and usually if you have good credit, you are more likely to get approved for a car loan. However, if you do have bad credit not all hope is lost! Using a bad credit car finance specialist could be the right option for you. As long as you can prove your affordability, are over 18 years old and not currently bankrupt them lenders may have options for you! You can usually benefit from lower interest rates and lower monthly payments when you have a higher credit score.
Shop around for the best deal for you
As mentioned, car finance isn’t just available at a car dealership. You can also use an online provide or car loan broker to help sort your finance for you. A Car Finance broker works with a large lending panel and they match you up with the most suitable lender for your circumstances, including bad credit car finance options! When applying for car finance you should stick to soft search credit checks only. Multiple hard searches for finance show up on your credit file and can negatively impact your credit score.
You can get any car you want within your budget
Traditionally you would see a car you like at a dealership and then get the finance sorted but would if you decided to sort your finance first? One of the main benefits of using a car finance broker is that you can get the car you want within your finance budget. Let the broker do the leg work for you and when you’re happy with the finance offered, you can then get any car from any FCA approved dealership across the UK. This give you added protection and more reassurance that the car is in full working order. You don’t get this type of protection with a private sale.
You don’t need a deposit for car finance
If you want to take out finance and don’t have time to save up for a deposit you can opt for a no deposit car finance deal. Some finance deals do suggest that you should put down a 10% deposit, but you don’t have to. However, even just a few months of saving up for a car finance deposit can work in your favour and make you more desirable to potential car finance lenders. Putting down a deposit means you don’t have to borrow as much from the lender and can reduce your monthly payments.
