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Rates from 10.9% APR. Representative APR 22.45%
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Representative Example: Borrow £6,000 with £1,000 deposit over 48 months with a representative APR of 22.45%, the monthly payment would be £153.29, with a total cost of credit of £2,357.76 and a total amount payable of £7,357.76. Car Loans UK is a broker not a lender. This is an example only, all finance subject to status. Lender fees may apply.
Understanding Car Finance
Understanding what types of finance are available could help you better prepare financially for the future.
What is car finance
A car finance plan is essentially a payment plan where the customer pays back the cost of the car on a monthly basis. Thus, the customer is able to spread the costs of their vehicle over a specified period of time, as agreed upon between the customer and the dealer. On average, these contracts last four years. However, the repayment period for each type of car finance varies. Our service is paramount in trying to help you secure the best car finance deal, which is why we suggest using a car finance brokerage site such as ourselves.
What are the benefits
Here are some key benefits of choosing a finance loan application with CarloansUK:
- Quick and Easy Process: Our streamlined application process makes getting a car loan hassle-free, saving you valuable time.
- Competitive Interest Rates: Benefit from competitive interest rates, helping you secure affordable monthly payments.
- Flexible Repayment Options: We offer flexible repayment terms to align with your budget and financial goals.
- Wide Range of Lenders: CarloansUK has access to an exclusive panel of reputable lenders, increasing your chances of approval.
- Expert Guidance: Our team of car purchasing experts are here to guide you through the application process and answer your questions.
- Bad Credit? No Problem: We work with individuals with various credit histories, including those with less-than-perfect credit.
- Online Convenience: Apply online from the comfort of your home, making the process convenient and accessible.
Types of Finance Agreements
Understanding what types of finance are available could help you better prepare financially for the future.
Hire Purchase (HP)
The most well-known finance option is through Hire Purchase.
This is where you hire the vehicle for the duration of the period that you are paying it off. Once you have paid it off, you will then become the owner of the car.
You pay for the vehicle in monthly instalments over a pre-agreed space of time. This could be months or years. Each monthly instalment will likely include a fixed interest rate and the interest rate is usually higher depending on your credit rating. Some finance options may come with a mileage limit however this is not the case with an HP finance contract.
Personal Contract Purchase (PCP)
Another extremely popular finance option is a PCP contract. This is similar to an HP purchase option, but once you reach the end of your finance contract, you have three options. You can choose to own the car by paying a final lump sum. Financers refer to this as a “balloon” payment. The amount of the balloon payment depends on the Minimum Guaranteed Future Value (MGFV) of the car which you’ll agree upon at the start. Because a significant amount of the cost is deferred until the balloon payment, then the monthly instalments are usually cheaper than with an HP deal. The second option is to return the car once the balloon payment is due, meaning you have just rented the vehicle and returned it. The third option would be to part exchange the car and then get another under a new PCP contract.
A personal loan is the acquisition of money from a lender who is not directly affiliated with your car. This would allow you to be able to purchase the vehicle outright with the lender’s money, and then pay them back over time on their variable fixed terms. This may be your best option to get the best interest rates for your personal circumstances. As the loan is not directly linked with the car, the lender would not be able to repossess the car but can take other forms of legal force. This could include retrieval of goods that are a sum of the cost owed.
There are many other types of finance options available at CarloansUK but these three are the most common options. For information on more finance options, simply navigate to the car finance dropdown menu available on the navigation bar.
Frequently asked Questions
A car finance broker is essentially a middle man between the customer and the lender. A car finance broker will take care of all of the complicated paperwork as well as the negotiations with lenders. This essentially means you can sit back and relax knowing that the broker is fighting your corner to get you the best deal possible. All whilst making your car finance journey as stress-free as possible. Not only this but car finance brokers such as ourselves, also have deals that aren’t usually available to the general public, and to top it all off. Car finance brokers will actually charge the dealerships instead of the customer.
If you have been refused by other brokers in the past, all is not lost. At CarLoansUK we have several finance options for those with bad credit scores. However, you should be aware that when you apply for car finance through us, a hard credit check will be conducted, which may in turn have a negative impact on your credit score. Especially if these credit checks have been done in quick succession. So therefore it is recommended that after being declined for car finance, you should wait between 3-6 months before applying again.
In short, the answer is no.
This is because the return value of the car has already been estimated once you have signed your PCP car finance contract. It is important to note that going over your agreed mileage allowance will also incur extra fees at the end of your PCP contract.
APR stands for annual percentage rate and is the total amount charged for the lend.
There are, however, two different types of APR. Exact APR in short means that the rate that is shown to you is the rate that you will get. Whereas, representative APR, however, means that 51% or more of the people who apply for the finance will receive that rate. What this means is that customers with poor credit scores could see a higher APR.
Representative APR is, for the most part, used to advertise the company’s rates. After you have provided all of the necessary information to the lender, they can then offer you your exact APR rate.
What is it?
Gap insurance stands for Guaranteed Asset Protection.
Essentially gap insurance is, is a form of insurance that is designed to cover the difference between the amount your insurance provider pays out in the event of your vehicle either being written off or stolen and the price that you paid for the vehicle. You should however be aware that gap insurance works alongside your standard car insurance and is in no way a substitute.
So when is gap insurance needed?
Gap insurance can be worthwhile in several ways. Firstly, if you have taken out a big loan to buy your car. Gap insurance would be beneficial as mentioned previously if your car is stolen or written off. This is because the gap will pay off the outstanding finance.
As well as this, gap insurance could also be beneficial if you are worried about your car depreciating. A brand new car will lose between 15-35% of its value in the first year. Therefore gap insurance can help you get a bigger payout if your car is written off after it has already depreciated.
If the vehicle is faulty on delivery, you can simply refuse the car and send it back to the dealership.
You can, however, you will have to ask the finance company for permission prior to making any sort of modifications.
Initially, applying for a car loan usually will have a negative impact on your credit score due to the hard credit checks that lenders will initially carry out. Although, you should be aware that if you make your car loan repayments on time. This will most likely have a positive impact on your credit score.
When you select HP finance, you agree to pay the total value of the vehicle, calculated as monthly instalments for the duration of your contract. Because interest and the final fee are added to your payment commitments. Therefore when you have made all agreed payments, you own the car.
Furthermore leasing a car involves monthly payments too, but these are rental payments only. Because the monthly figure you pay when you lease a car is calculated using different criteria such as a set mileage. Then at the end of your lease, the vehicle is returned to the dealership.
It can be quite confusing, but there are three elements of the loan to keep in mind when you’re deciding if this is the right type of loan to help you to buy a car.
Because many car dealers who offer you PCP car finance deals will expect you to pay a 10% deposit. Although occasionally there may be incentives from the manufacturer to entice you, such as a deposit contribution. This is sometimes up to £2000 and is only available if you use their finance option. Also, as with any other loan, the bigger your deposit, the less you’ll need to borrow and the less interest you’ll pay and in turn, opening yourself up to better PCP car finance deals.
Then the amount that you will need to borrow will be calculated based upon the depreciation of the car’s value across the length of your loan term. Then the deposit you put down is deducted from this amount. So, you’ll pay off the amount they calculate, minus your deposit but plus interest, in monthly payments for the length of your loan agreement. PCP agreements include the APR, because it takes into account the interest charged on the outstanding balance and any other fees associated with the loan agreement. Furthermore, a loan agreement lasts for 24 to 48 months and the interest added is usually from 4% APR upwards.
If you decide that you want to own the car outright at the end of the deal, you can make a final balloon payment. This is also called a GFV or Guaranteed Future Value amount. Then this is calculated according to the amount that your car is anticipated to be worth at the end of your loan agreement. Of course, this is entirely optional, but the amount they set is not usually negotiable.
It is generally advisable to carry out a detailed comparison of the PCP car finance deals available to you when you’re looking to purchase a car. Because any loan you take out must be affordable and you must consider all of your essential outgoings and how this will affect them. Then failing to make payments will adversely affect your future credit options and likely cause you a huge amount of stress. Additionally, it is always advised to seek professional advice if you are unsure how to proceed.
Compare PCP car finance deal with other car financing options
You should also look ahead, to make sure that you choose the type of deal that will make it easier for you when the agreement ends. Then think about how likely it is that you will want to purchase the car at the end of the loan term, or if you will want to upgrade to another car
There are typically three options open to you when the term of your PCP car finance deal ends.
If you decide to pay the final balloon payment, then you will own the car you have been paying towards over the course of your loan term. Because most car finance contracts will include an extra fee to transfer ownership. Also the typical cost for this is about £100, but check your contract before signing if you think this is the option you might take, as it can be up to £500.
Alternatively, you can simply hand the car back to the dealer after you make your final payment. Because many people do this. Comparatively if the car is valued at a higher price than the balloon payment, you might be offered the difference as ‘equity’. Then this equity could then be used as a deposit on another new car, with a PCP finance deal. Unfortunately you won’t be offered the cash instead.
If you’re told that the car is in fact worth less than the dealer originally anticipated at the end of the deal, the best option would almost certainly be to hand the car back.
Similarly, if you want to look at completely different options for your next car, you can just hand the car back to the dealer once you’ve made your final payment. Then of course you will need to pay for any damage, however, and be prepared to pay extra if you have gone over the mileage agreed at the start of the deal.
At any point if you return the car, at the end of the deal or trading it on, there are potential charges. If you set out a comprehensive plan for usage, and think about the situations that may arise that might necessitate using the car more than usual, you can usually avoid the extra charges.
The first is for going over the agreed mileage. At the start of your application you will be asked to state how many miles you will clock up each year. The reason for this is to enable the finance company to make an accurate prediction as to the car’s eventual value once you hand it back at the end of the deal. Work this out carefully when you make your initial application since this extra charge is completely avoidable. Sometimes, for unforeseen reasons you will go over the agreed mileage. Just be aware that for every extra mile, you will probably be charged about 10p.
The second relates to damage to the car. It will be examined when you take the car back. The finance company will make reasonable allowances for everyday wear and tear that might be expected with regular usage. If they decide that any damage to the car adversely impacts their chances of reselling it, however, you may be asked to pay the amount that is needed to put things right. You can, of course, get the damage repaired yourself before returning the car. Always do this at an approved service centre to avoid any problems later on. This may end up being cheaper than paying the rate the finance company will charge. It is essential to read your contract carefully after conducting a car finance comparison and choosing the vehicle of your choice.
Our smart online system is quick and simple to use. It takes just a few minutes to complete with a few personal details. Once that part has been processed, it will go to a decision stage. Before completion, you will need to add in the details of the car you are hoping to purchase. If you get accepted for car finance, there is no obligation to complete the process.
While being on benefits isn’t a bar to obtaining car finance, there are a few factors that can have an effect on your eligibility:
Late repayments: falling behind on payments for other debts will show in your credit score. This could have a negative effect on an application for a car finance loan. It might be worth seeing if you can get back on schedule with payments to demonstrate that you are making your instalments on time.
IVA: if you have an Individual Voluntary Agreement lenders may require permission in writing from the person dealing with your insolvency before a loan can be agreed. A settled IVA will not necessarily affect you obtaining car finance on benefits.
Bankruptcy: if your bankruptcy has been discharged, you can still apply for car finance. However, if it is still current any application is unlikely to be successful.
County Court Judgments (CCJ): CCJ’s are not always a bar to obtaining car finance, so it is always worth making an application.
Unemployment: car finance is available if you are unemployed and receive DLA or PIP
Each person seeking car finance on benefits has their own individual requirements and repayments are worked out accordingly. Car finance repayments are factored in once everything else has been accounted for. It is worth taking the time to see if you are eligible for car finance.
There is also a useful car finance calculator which will help you work out the possible amount of monthly repayments, depending on the loan amount and the length of the repayment period.
It is worth taking the time to consider the extra costs involved in car ownership. As well as affording the payments for the car, you will also need to pay for the tax, insurance, fuel and any other maintenance requirements. Different cars will incur different costs, so it’s recommended that you think carefully before deciding on a particular car. For example, a car with a more powerful engine may use more fuel or a car with extra modifications may incur higher insurance fees.
Making too many applications can have a negative impact on your credit rating; it will look as though you desperately need credit and may be borrowing beyond your means. Being aware of the difference between a hard and soft search is helpful.
Interest rate – high or low?
The Money Advice Service advises taking caution about borrowing from lenders who feature highly when searching for particular search terms such as ‘loans for people on benefits’. There may be some lenders who exploit people’s financial situation and charge extortionate rates of interest. A typical rate of interest would be somewhere between 10-20%. Some exploitative companies could go as far as charging 500% up to 4000%.
Here at Car Loans UK, we cater for many types of benefits including:
- Personal Independence Payments (PIP)
- Disability Benefits
- Universal Credit
- Child Benefits
- Housing Benefits
- Industrial Injury
- Disablement Benefits
We do not accept car loans on the following benefits:
- One-off bonuses
- Unemployment Benefits
- Jobseekers Allowance
- Maternity Pay
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