Car finance is a great way for drivers to spread the cost of a car into monthly payments. Instead of forking out a large cash sum for a car, finance enables you to pay for it over a term that suits you. Whist car finance deals are very beneficial, choosing the wrong deal or jumping at the first deal you are offered can be costly. It’s also worth remembering car finance won’t be accessible to everyone and you may even be declined a car loan if you are not suitable. Before you apply for a car finance deal, read our top tips on how to make your next car finance deal work for you and your situation.
Know your budget.
The first thing you should do is calculate your car finance payments to see how much you could afford to borrow. Usually, car finance deals last between 3-5 years and it’s essential each payment will be met. This means you should set a finance budget for monthly payments which is affordable and realistic. Car finance lenders will ask you to provide proof of bank statements and pay slips to verify your affordability. A lender could even reject your application if you can’t afford the loan you are applying for.
Improve your credit score.
Your credit file is very influential on your ability to borrow money. Your whole credit report is based on your payment history and how much debt you currently owe. A low credit score can put lenders off because you may have had trouble in the past making payments on time or already have high levels of credit. Before you apply for finance, you should check your credit report and make sure all your information is accurate and up to date. If you check your credit score and find it is low, you should take some time to improve your credit situation to help to get you a better deal and improve your chances of being approved.
Compare interest rates.
Interest rates are really important when it comes to borrowing money. A higher interest rate means you pay more back in interest to the lender. The interest rate you are offered can be determined by a number of factors such as your personal situation, the car you choose, the deposit you have and the lender. It’s important to compare interest rates on finance deals and find the lowest possible ineterst for your situation to ensure your deal is the most affordable car finance it can be.
Explore finance options.
Hire Purchase and Personal Contract Purchase are two of the most popular ways to finance a car. Your personal situation may make you better suited to one form of finance over the other. Both forms of car finance are secured loans which means the lender owns the car during the agreement, but your ability to take ownership over the vehicle depends on which finance deal you choose. Take some time to explore both HP and PCP to ensure you’re making an informed decision.
Pick the right car.
Your budget can determine which cars you can afford but it’s also important the car you get is fit for purpose and meets your requirements. Car finance can be spread over a number of years so it’s worth thinking ahead and if your situation will change in the near future. Do you plan to expand your family and need more space? Will you change jobs and increase your mileage? Considering what you need from your next car can help to speed up the buying process and ensures you get the right car
