When it comes to car finance, there are a number of different options for buyers, some that you may not have been previously aware of. Instead of the traditional hire purchase option, finance companies may now offer some of their customers products such as lease purchase or personal contract purchase (PCP). These products are often a cheaper option for customers who are looking to buy new or nearly new cars on finance. This is because, unlike a hire purchase contract, part of the cost of the car is deferred until the end of the contract. This is called a balloon payment (for lease purchase products) or the guaranteed future value/residual value (for PCP products), and in order to take ownership of the car, this payment must be made when the contract comes to an end.
With a PCP (Personal Contract Purchase) agreement, the customer has the choice whether or not to pay the guaranteed future value, and therefore take ownership of the car, hand the car back to the finance company or part-exchange it to use any remaining equity (the difference between the agree guaranteed future value and the actual value) for a new finance contract. However, with a lease purchase agreement, you are required to pay the balloon payment in order to settle the contract – so what happens if you don’t have the cash for the lump sum?
As long as you’ve made your payments on time and meet all of Creditplus’ eligibility requirements, we should be able to help you re-finance the balloon payment on your vehicle. We will place you with one of our trusted lenders who will provide the funds necessary to settle of balloon payment, which you will then pay back in monthly instalments in the same way as a hire purchase contract. When it comes to the end of this contract, you will have full ownership of the car.
Re-financing a balloon payment is a very common occurrence, and can often be provided at a better rate than the initial car finance policy, even if you took it out with a company that wasn’t Creditplus. This is particularly true for those who had poor or little credit history when they took out the original car finance agreement, who may have found that their credit score has gone up thanks to keeping up to date with their payments.
To find out if we could help you to re-finance your balloon payment, make an application today and one of our customer advisors will be in contact, or to find out more information about car loans, visit our dedicated help section.