The popularity of car finance is on the rise and more people than ever are choosing to get their car on some sort of credit. But why is it so attractive for car buyers across the world? There are a few different types of car finance which includes a personal loan option, Personal Contract Purchase and Hire Purchase being the most popular. In most finance deals, you borrow a certain amount of money for your desired car and then make payments each month till the end of an agreed term, usually between 2-4 years. There are a few different options at the end of your finance deal. For example, at the end of a Personal Contract purchase deal, you can choose to hand the car back, pay off the ‘balloon’ payment and own the car or use the value of the car towards your next car! When car finance was first offered, there was many limitations and interest rates were typically higher than they are today. However, in 2019, there are many options for people with a range of different circumstances! So, why should you choose to get your next car on finance?
Spread the cost
One of the main reasons people choose to finance their next car is down to how affordable it is. New cars these days can seriously burn a hole in your pocket, with a new mid-range family SUV setting you back around £40,000! Not many families have that sort of cash upfront to spend on a new car and that’s where car finance comes in! You can spread the cost of owning a car into affordable monthly payments!
Don’t let your credit score hold you back
A common car finance myth is that you can’t get car finance with bad credit however, this isn’t strictly true anymore! Whilst having good credit score can make it easier for you to get accepted for car finance, a low credit score doesn’t have to mean that you would be refused car finance either. When you apply for finance, lenders want to know that you can be trusted to pay back any money that you borrow, and they can gather this information from your credit file and score. More lenders are also choosing to look at current affordability now too. This means that if your credit score is a little on the low side, you still have a chance of getting a car finance deal. Sometimes bad credit car finance applicants may be offered higher interest rates as they are seen as more of a risk to a potential lender. Paying back your car finance on time each month can also help you increase your credit score and set you up for a potential better rate in the future, as you have proven that you can be trusted to make all your repayments on time.
No deposit, no problem!
There is also a big misconception that to get accepted for car finance you need to put down a deposit. However, there are many no deposit car finance options available today. Not everyone is able to put down a large deposit straight and you may want to keep your savings fund for a rainy day, with no deposit car finance you can do exactly that! Having a deposit reduces the total amount of the loan as you will have already contributed to payment towards the car and can in some cases strengthen your application. A deposit can also sometimes lower the interest rate that you are offered because the overall lend for the provider is less risky.
More available for different circumstances
As mentioned, car finance used to be very black and white and it was hard for people with different circumstances. Car finance has progressed quite a lot over the past few years and now it is more accessible for all. For example, people who are self-employed and paid cash in hand can struggle to provide their income as work load and pay can vary. However, as long as you can prove your current affordability you should be good to go! It is recommended to pay any income into a UK bank account held into your name for at least 3 months before you apply for car finance! Many people also think that you can’t get car finance when you receive benefits in the UK. But why should having a benefit only income stop you from having a car to get around? A range of reputable lenders now specialise in helping people who receive benefits such as disability allowance, carers allowance, child tax credits and more!