Getting a car is a big decision, and that’s why it’s important to choose the right car finance for you and your needs. You should always research the best rates and finance types to determine which best suits you.
Car finance options
There are three main car finance options that are popular with people applying for finance, which is best for you depends on what you’re looking for out of your agreement.
Personal contract purchase (PCP) is for those who would like to exchange their car at the end of their agreement. You pay a deposit followed by monthly instalments and at the end of your agreement you have three options, return the car, trade it in for a new one, or pay a lump sum and own the car.
A hire purchase (HP) contract is ideal for those who want to own their car at the end of their agreement. You pay a deposit followed by monthly payments and own the car at the end of the agreement. Unlike PCP, you have no mileage limits or restrictions on what you can do to the car as you won’t be returning it to the finance company.
A car loan gives you immediate ownership of your car. You get a personal loan from the bank and use it to pay for your car; you then pay the bank back in instalments. However, this can be difficult to get unless your credit profile is in good standing as its an unsecured loan.
Benefits of car loan
There are many benefits of a car loan, it doesn’t just give you immediate ownership but can make it easier to afford newer and more reliable cars at a fixed monthly price.
It also means you wont have to save for a deposit, which may help you preserve any savings you may already have.
Can I get a car loan with bad credit
When applying for a car loan you should ensure that your credit score and profile are up to scratch, with no missed payments, CCJs, or anything that could cause an issue with lending. If your credit profile isn’t in good standing and you make an application a hard search may be conducted on your account which could damage your chances of lending approval in future.
When you make your application, lenders will assess things such as your income and employment status, your credit history, and existing financial commitments.
Th bottom line
A car loan is perfect for those who want immediate ownership of their car whilst spreading the cost over a certain amount of months. It is an effective way to own a car whist keeping your finances manageable.
By choosing a finance agreement that suits your budget and needs, you could be one step closer to getting behind the wheel of your next car.
