Last Updated on November 8, 2023 by Usman Khan
UK Car Finance is a leading finance broker who helps customers across the UK compare finance deals with low rates! They work to help drivers compare multiple finance deals at once and choose the best deal for their individual circumstances. Jumping into the first car finance deal you’re offered can cost you in the long run as it may not be the most cost-effective option. There are factors that affect the cost of car finance and doing your research first can help to make your deal cheaper.
It’s worth remembering car finance is always subject to status and may not be offered to each and every applicant. The decision to offer finance is ultimately in the finance lenders hands and they have their own criteria to meet before you can be eligible for a loan. Lenders put common roadblocks in place to make their decision such as income, job status, affordability, credit score, age and license type before finance could be offered.
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Calculate your loan first
Your budget for car finance needs to be affordable as it’s important you can meet each and every payment over the term. Finance can last between 3-5 years and its essential your affordability won’t change in the near future. Using car loan payment calculators before you get finance is a great way to see how much you could borrow based on your monthly budget and desired loan term. Drivers can then use this quote to shop for cars within their budget and get an idea of what’s affordable.
Improve your credit score
Your credit score is checked when you apply for finance so lenders can assess how you’ve handled your finance in the past. Based on previous behaviours they can predict which type of borrower you will be in the future. A better credit score usually indicates you can meet payments on time and in full which makes you less of a risk. It can be harder to get approved for finance or you can be offered a higher interest rate which makes finance more expensive than it needs to be. To get a lower interest rate, you could consider working on your credit score in the run up to a finance application.
Save money for a deposit to put down
There are many car finance agreements that don’t require you to put down a deposit at the start of the agreement. However, it can help to make your finance deal cheaper. A deposit for car finance is an initial lump sum payment to the finance lender. The deposit is then detracted from the total sum and makes the loan amount smaller. This can help drivers to benefit from lower monthly payments. It’s up to you how much you can put down for finance, but some agreements can recommend around 10% of the loan amount as a deposit contribution.
Compare low interest deals
Most car finance deals come with interest to pay and is included in your monthly payments. More expensive cars can benefit from interest free car finance deals due to their higher purchase price but you will usually have to pay some sort of interest on used cars. Interest rates reflect the cost of borrowing and vary from customer to customer. Choosing a lower interest rate can make your finance more cost-effective and can be determined by a number of personal circumstances. Shopping around for the lowest interest rate can help to prevent paying more than you need to for your finance.
Explore types of car finance
There isn’t just one form of finance to choose from and looking into the pros and cons of each can help to make an informed decision about which is best for your circumstances. Both Hire Purchase and Personal Contract Purchase are forms of secured loan which mean the finance lender owns the car throughout the agreement. Interest rates and monthly payments can differ on both forms of finance so it’s worth comparing each before committing to getting a loan.
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