Car Finance Explained

Car finance enables consumers to purchase a car that they would otherwise not be able to afford. Car finance can support upgrading to a luxury model, or getting a family runaround for those on a budget.

The attributes of car finance that differ from personal loans is purely that personal loans are not attached to the car you purchase. When you get car finance, the make, model and condition of the car you are purchasing is used to secure the loan, so that should you fall behind the lender knows that they have covered the loan amount if someone cannot make the payments anymore, though this is very rare indeed.

It is more common for car finance to be supplied to those that can’t get a personal loan, due to the flexibility that a personal loan can offer. However, if you already know that your credit rating is not very high, chances of being accepted are very slim. Car finance on the other hand is easy to get accepted for, though the rates will vary depending on the credit score that you personally hold.

Car finance is more commonly taken out by individuals rather than businesses and can be used on its own, or in conjunction with the car, the insurance, tax and even loan protection on the car such as GAP Insurance, Car warranties and Payment Protection Insurance.

Car finance is paid off by regular repayments, usually consisting of a direct debit from your account. The repayment amount will vary on the following factors. The amount of car finance you have signed up for against the term of the finance agreement. This is usually 48 or 60 months, and finally on the individual car finance interest rate. There is also some consideration on any residual value left at the end of the loan period.
The bigger the risk you are perceived to be by the lender, the higher the interest rate will e on your car finance, so if you are declined, it is possible to re-build your credit rating and start over.

Car Finance options: