There are lots of questions around car finance such as ‘what are the different finances available?’ and ‘how do I apply?’. We’ve put together some of the most frequently asked questions to help you understand when navigating the car market.
Car finance is a credit agreement between you and the lender. This allows you to purchase a car you may have been looking at or helps you look for a new car with the knowledge of how much you can afford to borrow.
You should consider car finance in two stages:
There are three different types of car financing available:
PCP (Personal Contract Purchase) – Also known as a balloon payment loan. This type of loan asks you to put down a 10% deposit and then pay monthly instalments over 1-5 years. At the end of the loan, you’ll have the option to pay the rest off and keep your vehicle or return the vehicle and avoid the balloon payment. One thing to consider is the chance of a mile restriction on your vehicle so it’s important to know this and stick to your dedicated miles as this could be an additional charge on top.
HP (Hire Purchase) – Essentially you’re hiring the car for a period of time. The dealers will usually ask for a 10% deposit towards the car and then you will pay monthly payments. Once you’ve made all your repayments you’ll pay one final fee which is commonly known as an ‘option to purchase’ fee which means you’ll then own the car outright.
Personal Loan – A personal loan and a bank loan have two different names but are the same type of finance. This is considered one of the simplest ways to get a loan and can be arranged easily.
With every loan, there is a wide range of pros and cons. It’s important that you know what you can afford on a monthly basis as failure to make payment may result in having your car repossessed.
This type of loan is where a third party (friend or family member) agrees to guarantee the repayment of the finance should you fail to meet the repayments. This does not mean that you are not responsible for repaying the loan, you should still make the payments as the finance will still be in your name.
Your guarantor must be over the age of 21. They could be a family member or a close friend – however, your spouse cannot legally act as guarantor for car finance.
Anyone can be eligible for car finance. Credit checks will be required and lending is subject to status. You must be over 18 years of age and a UK resident. You also must be employed and have a minimum income of £10,000 and have a UK bank account in your name.
If you have a poor credit rating or no credit under your name, getting a car finance agreement can be difficult. Some specialist lenders offer finance to people with bad credit. Before looking for a car consider getting a free credit report to find your eligibility.
Here at Forza Finance, we offer loans for all types of vehicles and assets. Simply use our loan calculator to find out if you’re eligible or speak to one of our friendly specialists.
When applying for a loan the lender will run a credit check against your name to see if you’re eligible for their product. They are keen to get an idea of your financial situation and how trustworthy you are. After the credit check is complete you’ll be given a score which will help the lender work out whether to accept your application for credit.
A credit check will show the following things:
Under certain circumstances, you can use your car as a deposit. It’s important that your car equals or sits alongside a cash amount that is enough to cover the deposit required. You should not automatically assume that your car will cover the deposit requested as its value may be less than you think.
Annual Percentage Rate or APR as it’s more well known is the official rate which can help you understand the cost of borrowing. It takes into account the interest rate and additional charges. All lenders legally have to tell you what their APR is before you sign any credit agreement.
Our services allow for a quick decision. Simply fill out the form on our homepage and get approved quickly.
The simple answer is yes. Many lenders are happy to offer a used or new car on finance.
They’ll need to prove your identity and one of the easiest ways to do this is with your driving licence. In some cases, a lender may accept your passport but this depends on the lender themselves.
You may also have to prove your income circumstances. This could require 3 month’s worth of payslips as this would allow them to see that you have a regular income coming in.
Finally, you’ll need two proofs of address. These can be in the form of utility bills such as gas and electric. This is so that the lenders can see that you’ve been a UK resident for over 3 years. If you’re new to the UK, some finance providers will do overseas checks to verify your previous residence.
To find out more about our finance options, get in touch with one of our friendly advisors for more information.