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Five stress-busting tips for securing the car finance you really need

VW Beetle

Looking to buy a used car? Need to secure finance? Not sure where to start? Relax, you’ve come to the right place…

When it comes to taking the stress out of getting the best deal, UK Car Finance are a specialist motor finance broker who can help take the stress out of financing a car.

We asked their resident expert Laura Mitchell-Hall to give her top tips…

Weigh up which type of finance works best for you

When it comes to buying a car, there are three main types of finance you might want to consider; a personal loan, Hire Purchase (HP) and Personal Contract Purchase (PCP).

Personal loans are offered by banks, building societies and other lenders. A personal loan is not secured against the car and comes with a fixed interest rate and set monthly repayments. You can use a personal loan for anything and use the amount to buy a car and then pay back the loan in monthly instalments. This is great if you want to own your car immediately- and if your credit record means you can get unsecured finance.

Hire Purchase usually consists of a 10% deposit and then fixed monthly payments over your agreed term. You don’t own the car until you make the final payment. This is great if you want to own your car at the end of the agreement and, because your payments are based on the full value of the car, will give you more money than Personal Contract Purchase towards your next car if you choose to change.

A Personal Contract Purchase is similar to Hire Purchase as you make fixed monthly payments for an agreed term based on the sale price less the pre-agreed resale value. This will usually make the monthly payments lower than for hire purchase but, because more of the loan is left owing until the end of the agreement, PCP may cost more overall. You have three options at the end of the agreement. You can return the car without having to pay the resale value (otherwise known as the balloon), pay the resale value and keep it or use anything over the resale value to put towards your next car.

If you are not sure which type of finance to select, we will be happy to discuss your circumstances with you and help you to decide.

Your credit rating is important

In simple terms, a good credit rating will increase the likelihood of securing a lower interest rate on future borrowing. You can get an idea of where you stand without harming your credit score using an online car finance checker.

It’s more difficult to secure finance with a poor credit rating, but it’s not impossible and there are things you can do to help improve your credit rating. Register on the electoral roll, get on top of any other debts by making the necessary repayments and if eyeing an HP or PCP deal, consider offering a higher deposit. However, the worse your credit record the more you will usually have to pay for finance if you do obtain it.

The good news, is that your score should improve if you secure finance and make all the payments as per the terms of the agreement.

You can learn more about how a credit score works and how lenders use your credit score by visiting Equifax.co.uk/ Clearscore etc.

Shop around and compare rates

As with anything in life, it’s wise to assess your options before making a final decision. Don’t agree to the first deal that’s offered to you – surprise, surprise, it may not be the best you can find. The lower the APR, the less interest you’ll pay, so it’s vital you compare rates.

Car finance providers usually work with a number of lenders and also have experts on hand to match you with the most suitable lender. Listen to what they have to say and don’t lose sight of the total amount repayable over the term of your agreement.

Save time by being organised

There are usually a couple of hoops to jump through when completing any car finance application, but that doesn’t mean the process has to be time-consuming.

If applying online, you’ll usually receive a phone call from the finance company and will be asked to provide a few documents to prove who you are. They’re doing this to prevent any fraudulent applications and because they are required by law to check your identity and address. Having those documents to hand can speed up the process.

Fill in your application correctly!

Ready to take the plunge? It might sound silly, but when you submit your car finance application, it’s crucial to fill out all of your details correctly. Just one letter wrong in your postcode could cause issues with verifying your living arrangements. Both cause delays so before you press submit, please check everything over!