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There are plenty of
available options for car finance when
purchasing a vehicle, but what is the best one
for you? That depends on your financial status.
Interest Free Car Credit
Loan
You would think that this
form of car credit would be the best for most
people but beware; deals that seem brilliant on
the surface could possibly have hidden agendas.
There are interest free car loans out there
which are usually associated with a car dealer
and are normally repayable over a very short
amount of time and large penalties will be
incurred if you break the terms and conditions
stated in the agreement. Do your sums, you could
be paying more for the car in the first instant
as the dealer may be making up for the loss on
the interest free car loan.
Refused or Poor Credit Car
Loan
There are many reasons why
someone may have been refused for a loan,
however having a poor credit rating for car
finance or a car loan doesn’t necessarily mean
that you won’t get finance for your new car.
Many dealers will work their numbers to create
an agreement that works for their books and
allegedly, your wallet. These car loans are
typically at a higher interest rate, as much as
27.9% APR. It’s a sad but understandably true
fact, that if you have poor credit rating or you
have been refused a loan in the past the
interest rate you are likely to pay for any
future loan will be higher, the reason being
you’ll be seen as a higher risk to the car
credit company. You’ll find these car loans
available where it is stated ‘guaranteed car
credit’.
HP
Regular HP or Hire Purchase
is for customers who have a good credit rating.
Lending rates vary dramatically between 9% APR
and 17% APR, so it’s worth shopping around to
get the best rate. With hire purchase you will
not legally own the vehicle until all the money
plus the interest is paid back to the lender,
therefore you will not be able to sell the car
or modify it without your lenders permission.
Your debt will be with the lender and not the
retailer of the car and the lender is perfectly
within their right to take the car back if your
payments cease.
Bank Loan
In our opinion, by far the
best way to finance a vehicle is to apply for a
bank loan. Interest rates are considerably lower
than other options at between 6.5% APR and 7.9%
APR which is fixed for the term of the loan.
Most banks will ask if you want to sign up for
loan protection insurance cover which will
protect your payments should you loose your job
or are out of work due to illness for any length
of time. It is up to the individual as to
whether you do this; some people like the
security while others believe it’s a waste of
money. Whatever your thoughts, you should always
be aware that there are consciences to not
paying the monthly amount agreed with your
lender when you have signed the terms and
conditions of the loan. Wherever you get your car
finance from, remember to ask yourself:
- What is the APR?
- Car price – Total
price including interest?
- Are there any credit
admin fees?
- Shop Around!
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