GOOD, FAIR & BAD CREDIT CAR FINANCE
Car Finance Deals UK
My monthly budget is
Rates from 8.9% APR. Representative APR 19.9%
Written By: Author’s Name
6 Easy steps to Applying for Car Finance
1
Apply for a Quote
Applying won’t affect your credit score; you’ll need a few things, like monthly income and three years of address history.
2
Decision in Minutes
With approval in principle, you’ll receive a call from your Account Manager to explain the way forward.
3
Find Your Perfect Car
Browse 100,000+ vehicles via your account or choose a car from any reputable dealer.
4
Nearly There
Final checks by the lender and your Account Manager sorts details with the lender and dealer.
5
Sign the Agreement
When you sign on the dotted line, the lender pays the dealer.
6
Enjoy
Collect your new car and drive off into the sunset!
Open Banking Increases your Chance of getting Approved for Car Finance
Open Banking is a New Fairer Way to Access Eligibility for Car Finance!
Drivers who want to buy a car but have poor credit scores are in a catch-22. They need a loan to improve their credit history but can’t find one because they’ve got bad credit.
However, the lack of decent credit history doesn’t necessarily mean you can’t afford to make the repayments on a car finance loan.
The old way of Assessing Bad Credit Applications is Outdated!
Lenders can struggle to assess drivers with poor credit files. Until recently, credit scoring had too much influence on assessment.
Credit scores don’t show the whole picture, focusing on negatives rather than positive financial choices and habits.
Open Banking Improves your Chances of a Successful Finance Application!
Open Banking allows lenders to look past your credit score to assess your affordability and whether you can afford the monthly payments to finance a car.
Many drivers are willing to share their bank transaction data, which could help them get accepted for a car finance loan.
How does Car Finance Work?
Car finance works by borrowing money from a lender to cover the cost of your new or used car and then paying it back in affordable fixed monthly repayments. There are several types of car loans available. Car finance is the generic term for borrowing money to buy a car.
Working out a simple budget of the amount you can pay monthly is a great help. That includes the monthly payments for the vehicle, insurance, fuel – the lot!
Lenders look more favourably at your application if you have a vehicle to part exchange. Alternatively, you can pay a deposit towards the car. Either will reduce the total loan amount.
Providing your loan is approved, you’ll make monthly repayments, plus interest charges, for the duration of the loan, typically a length of between one to five years. With most car financing, the lender will secure the loan against the vehicle,
Working out a simple budget of the amount you can pay monthly is a great help. That includes the monthly payments for the vehicle, insurance, fuel – the lot!
My monthly budget is
Rates from 8.9% APR. Representative APR 19.9%
Types of Car Finance Deals
There are two popular types of car finance to choose from, hire purchase (HP) and personal contract purchase (PCP). A third option is a personal car loan; however, you will typically need a good credit rating to get accepted.
Hire Purchase
HP is the standard loan type when financing a used car. Not many new vehicles are purchased with an HP car loan.
Personal Contract Purchase
Are you buying a new car? Personal contract purchase loans are the most popular way to buy a new vehicle. Large brands, such as Ford, BMW and Vauxhall, will also offer “Approved Used” cars up to 3 or 4 years old on a PCP agreement. Most cars bought from independent dealers sell on HP loans.
Monthly repayments for PCP loans are lower than other car finance. Still, you are liable if you exceed the agreed mileage or give back a damaged vehicle.
Personal Car Loan
However, getting accepted for a personal car loan requires a good credit score. Monthly repayments on a personal loan are similar to those for an HP loan but somewhat higher than a PCP. You won’t have any restrictions like other types of car loans that use the vehicle as security.
Choosing the Best Car Financing Option for You
For most of us, it comes down to a choice of Hire Purchase HP or Personal Contract Purchase PCP, with Personal Car loan a distant third option.
- Do you want to drive a brand-new car? It’s a PCP, or perhaps save some money and get a nearly new car, also a PCP. Maybe you’d like to save a lot of cash and buy a decent used car! Now that’s an HP?
- Have you thought about if you want to own the car when the agreement ends? That’s an HP. However, if you will be happy to give the car back when the contract ends? Go for a PCP, and take out another car finance loan when that finishes?
- If you are happy to accept restrictions like mileage and where you service the car, it’s a PCP. However, if you don’t want rules, take out an HP.
- Are you thinking with your head or your heart? Does the car you like have a low depreciation rate? Either an HP or PCP is OK. Or will the value drop like a brick? A PCP might be best.
Many other factors affect your choice of car finance, so think through the pros and cons. When you’re ready, make an application to find the best deal from the panel of lenders. You’ll have a car finance expert guide you through the financing process.
Car Finance with Bad Credit
Finding a car loan for bad credit can be more difficult than with better credit. However, getting accepted is possible, even if you’ve been unsuccessful in applying for car finance elsewhere. You can apply for a no-obligation quote that will not affect your credit score and take it from there.
FAQs - Car Finance Deals.
Note: Don’t assume the car loan with the lowest monthly repayment is the cheapest finance option overall. You may have paid more interest charges by the time the contract ends.
A PCP loan will give you the cheapest monthly repayments. Still, the downside is you won’t own the vehicle because you only borrow the amount the car will depreciate over the contract period. You are not repaying the total value. You’ll have to pay the balloon payment if you want to own the vehicle.
Your other finance option, an HP, or personal loan, has a higher monthly repayment. Still, you will own the vehicle on the final payment.
Note: The calculator is an estimate repayments could be lower or higher subject to personal circumstances. The brand, model and age of the car you purchase will also impact the final figure quoted.
For eligibility to apply for car finance in the UK, you must be at least 18 years old and have been a resident of the UK for a minimum of three years.
The interest charges are the cost of borrowing the finance to buy your car. Monthly repayments over the loan term comprise a portion of the amount you borrow and the interest charged.
The amount of interest you pay on borrowing is the APR Annual Percentage Rate. Your credit rating helps lenders decide the interest rate to offer you. A good credit score will likely attract a lower APR.
A part-exchange is an upfront payment towards your next car, like a cash deposit. Using your current car as part payment will reduce your monthly repayments on a car finance agreement.
Lenders can act favourably when you part-exchange towards a new car, making the approval more likely. Requesting a lesser loan may also give you more options. The traditional deposit of cash towards the vehicle will be equally as welcome.
If you’ve applied elsewhere (such as a bank, car dealership or even another car finance broker) and been refused car finance credit. We are often able to help if you have not succeeded elsewhere. Many lenders on the panel specialise in assisting drivers with bad credit scores.
Once you have “approval in principle”, you’ll be given access to more than 100,000 vehicles to view on the car search. When you’ve found your dream car, you’ll need to pass on the car’s details to your account manager, sit back, and we’ll do everything else.
Alternatively, you may select a car from another search, such as AutoTrader. Remember, your account manager is on hand to assist you in sourcing the car that matches what you want.
If your loan is for a lesser amount, your monthly repayments are lower as well; alternatively, you could reduce the length of the loan.
While there is no set amount for putting down a deposit when buying a car on finance, typically, 10% of the car’s value is considered good. However, don’t leave yourself short; you’ll need to consider insurance and running costs.
Although getting a car outright with cash savings is the cheapest option, with no interest charges. You’ll likely restrict yourself on the choice of car you can drive unless you are loaded.
My monthly budget is
Rates from 8.9% APR. Representative APR 19.9%
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