Car loans enable you to spread the cost of getting your next car into affordable payments. There are a number of car finance agreements available in the UK and it can be hard to know which is right for you. Car loans are never guaranteed for everyone but there are a few ways in which you can increase your chances of getting approved and get the best deal possible. It’s important that you shop around for different rates, and we’ve compiled a list of the best ways to get a good deal on a car loan.
Which factors can affect car loan rates:
The amount you pay for your car finance each month can vary based on a number of factors.
Credit score. Lenders will usually require you to pass a credit check before they accept you for finance. Car loan lenders want to know what experience you’ve had with managing credit in the past and they can do this by taking a quick look at your credit report. People with good credit scores usually get access to better interest rates and end up paying less overall. If you have a low credit score, you could consider increasing your credit score before you start applying.
Interest rate. Your interest rate offered will determine how much you will pay in additional fees. In short, interest rate is the cost of borrowing. Your interest rate can be determined by your deposit contribution, credit score, length of finance agreement and more. Low interest rate car finance means you won’t pay as much overall and can help to make your finance more affordable.
Deposit contribution. In terms of your deposit, the more you put in, the more you get out. Putting down a deposit for a car loan can help to increase your acceptance rates and also help to reduce your payments. Some car loans also require you to put down a deposit to secure your deal so it can help to save up for a deposit before you start applying.
How to get the best deal
Its recommend that you shop around for the best finance deal possible, but you may be wondering where to start. Let’s take a look at how you can get the most affordable car loan for your circumstances.
Budget first
When it comes to financing a car, budget is everything. Car loans usually last between 2-4 years so it’s important that you know you can meet your payments each month over a long period. Your monthly budget should be realistic and afford as it’s crucial that you can meet your payments each month. In some car finance agreements, such as hire purchase agreements, the loan is secured against the vehicle. This means if you fail to meet your repayments, the lender has the right to take the vehicle away from you.
Calculate your loan
By using a car finance calculator, you can see how much you could be offered for finance before your even apply! You just need to set your monthly budget for finance the duration of your loan and what your current credit rating is, and you can see how much you could be offered for car finance. You can then get a better idea of the cars available within your budget!
Use a broker
Shopping around for a car loan is a great way to get the best deal but making multiple application with different companies in a short space of time can harm your credit score. Alternatively, you could consider using a car finance broker to help. You only need to apply once with a broker and then they put your application in front of a wide range of lenders on their panel. They can then select the best finance rate for you. You can then take your finance deal to any dealership in the UK that is verified by the Financial Conduct Authority.
Consider different types of cars
We all know getting your dream car is a really exciting prospect, but you could save money by comparing a range of different cars. If you want to keep costs low, you could consider a cheaper car as you will be taking out a cheaper loan. A loan that is worth less may be more affordable and you can pay it off quicker.
