Quick Car Loan Tips For Beginners

If you simply can’t wait to drive away your dream car, the likelihood is you will need access to credit. A car is usually the second largest purchase most people make, so it’s important to get the best deal possible.

Factors such as your credit rating, income and current financial status will dictate which form of credit is appropriate for the purchase of your new vehicle. There are four main options for you to consider.

Hire Purchase

Buying your new car via a hire purchase agreement allows you to drive it away after putting down a deposit and signing a contract. You will need to repay the purchase price in instalments – usually over a period of two to five years. There is also usually an option to purchase fee at the end of the agreement.

Although hire purchase car loans can get you into your new car on the same day as your loan application is processed, the vehicle is not truly yours until the loan has been fully settled. Options for bad credit are also available. Note that a bad credit car loan can be much more expensive.

Personal Contract Purchase

This form of car loan works in a similar way to a leasing agreement. It usually requires a smaller deposit than a hire purchase agreement, and the monthly repayments are typically lower. However, there is a significant final fee to pay at the end of the contract if you want to take full ownership of the vehicle. Alternatively, you can simply hand the car back at the end of the agreement.

Personal Loans

A personal loan from a mainstream bank or building society will give you full ownership of your vehicle from the moment you purchase it. This means that you are free to sell the vehicle at any time. However, unlike loans that are secured on the car, there is no statutory right to voluntarily terminate the loan agreement after half the repayments have been made.

And because there is usually no security attached to a personal loan agreement, the interest rates charged are usually higher.

Peer-to-Peer Loans

Peer-to-peer platforms provide a convenient and affordable way to secure the car you want from the dealership of your choice. Application processes employed by most peer to peer platforms are usually streamlined, so you can have your loan approved and paid out within just 72 hours.

A peer-to-peer loan can be used for just about anything, including the purchase of a new car. And as long as you have a favorable credit history, you may be able to secure a highly competitive interest rate.

This is because peer to peer lending is based on savers lending directly to borrowers.

There is no bank involved, which means the overheads and bureaucracy of such a large financial institution aren’t causing delays and pushing up the cost of borrowing.