Car credit explainedThere are basically two different options for car credit, dealer finance choices and independent finance both having more than one choice to choose from. Here we will take a look at these options and explain them which could make things a great deal easier when trying to decide which option will be the most suitable for you.
There are basically two different options for car credit, dealer finance choices and independent finance both having more than one choice to choose from. Here we will take a look at these options and explain them which could make things a great deal easier when trying to decide which option will be the most suitable for you.
Your choices for finance
• Hire purchase also known as HP – hire purchase is a common way of raising finance to pay for your car when you buy it through a car showroom. Almost all dealerships will offer you this option as a way of financing your vehicle.
• When considering hire purchase you will be able to spread out the cost of the car over a period of time. The longer you take out the agreement then the cheaper the monthly repayments could be but you will need to consider that you will pay more out in total with the interest that was added on.
• When taking hire purchase you will be asked to pay a deposit on the car which is generally in the region of 10% of the amount you are borrowing. For instance if the car you wanted to buy was £20,000 you will have to pay a £2,000 deposit and then pay the £18,000 back over the term of the agreement. If you offered to pay more in deposit you will have to borrow less so will pay less in interest.
• Personal loan – the beauty of the personal loan is that you will have money in your hand when you walked into the showroom and this can give you some bargaining power to get something knocked off the price.
• When looking for a personal loan you could shop around and one of the best ways could be with a specialist motoring website that could help you to find the most suitable loan with the lowest rates of interest.
• When considering applying for a personal loan one of the main factors taken into account as to whether your application is accepted or denied is your credit file. If you have a good credit history then you will get access to the best deals with the lowest interest rates. If your credit rating is bad then you might have to take a secured loan or a bad credit loan which often comes with higher rates.
• Credit card – if you have a credit card with a low rate of interest or you take one out with a 0% deal this could work out in your favour when looking for car credit. If your credit rating is excellent you could take advantage of the 0% deal and shop around for the best deal and transfer your balance to it. Usually this will only work out if the cost of the car was not huge or if you had a great credit limit.
Posted by Edwin Miles on