If you’re looking to buy a new or used car and considering taking out a finance agreement, there are a few options available to you. My Car Credit provide a snapshot of the pros and cons of a Personal loan versus a Car Finance Agreement. Whichever you choose, we can take care of both!
Unsecured Personal Loan
With an Unsecured Personal Loan option, you can borrow a lump sum which you would repay at a set monthly rate within an agreed time frame, usually between 24 and 60 months.
Personal loans are not secured against the value of the car, this means you would own the vehicle from the start and there is no deposit required.
It is important to consider that although your monthly repayments would be smaller, the longer you choose to take your loan over would result in you paying more interest than if you chose a shorter term.
Like all applications for credit, the chances of you getting accepted for an Unsecured Personal Loan will depend on your credit history. If you have a good credit history, have paid your debts on time and never had any CCJ’s against your name, the higher chance you will have of being accepted. If your credit history is poor and you have missed payments in the past, you may be declined or you may end up paying higher interest rates than perhaps the headline rate advertised.
My Car Credit work closely with Personal Loan funders such as Ratesetter and Amigo Loans, you can make an application on our website to determine your chances of being accepted and because we only carry out a ‘soft search’ there will be no trace left on your credit file.
Hire purchase is one of the most common types of car finance within the UK.
With a Hire Purchase agreement, the car loan is secured against the car, which is owned by the lender. Once all of the monthly payments have been made, the car becomes yours.
Like with the Unsecured Personal Loan option, you would be expected to make monthly repayments within an agreed time frame, usually between 12 and 60 months, plus interest and a deposit is usually required.
Hire Purchase Agreements are popular with car buyers because they can spread the cost over an agreed time period, making it more affordable and the interest rate is fixed so they know exactly what they have to pay each month and how long for. There is also no restrictions on mileage.
My Car Credit have access to a panel of over 25 lenders that offer Hire Purchase Agreements, catering for credit profiles that range from excellent to poor, retired people, young people, self-employed, and so on.
You can make an application on our website to determine your chances of being accepted for a Hire Purchase Agreement and because we only carry out a ‘soft search’ there will be no trace left on your credit file.
Personal Contract Purchase
Personal Contract Purchase agreements are a widely popular choice for car buyers due to its flexibility and lower monthly repayments.
Similarly to a Hire Purchase Agreement, you would pay an initial deposit and then pay monthly installments. What makes a PCP different to a Hire Purchase Agreement is that your monthly repayments are only paying off the depreciation of the car rather than its entire value.
At the beginning of the PCP agreement, a Guaranteed Future Value (GFV) is estimated – this is the expected value of the car at the end of the agreement. Because of this you would need to provide an estimation of your annual mileage.
This would mean lower monthly payments for you, but there would be a balloon payment at the end to pay (the GFV) there are 3 options available to you regarding the balloon:
- You could buy the car by paying the GFV outright
- Give the car back (the lender has already estimated the value of the car so this would settle the outstanding finance)
- Part exchange for a new car
As well as lower monthly costs, many car buyers prefer PCP as it enables them to drive a new car every 3 years and gives them the flexibility to give the car back at the end of the agreement and walk away without the hassle of having to sell it on.
You can make an application on our website to determine your chances of being accepted for a Personal Contract Purchase and because we only carry out a ‘soft search’ there will be no trace left on your credit file.
If you need any help or advice about which finance option is best for you, whether it’s a Hire Purchase agreement, Personal Contract Purchase agreement or a Personal Loan, our team of Car Credit Specialists can advise you. Just give us a call!