If you’re looking to buy a nearly-new or used car and considering taking out a finance agreement, you’ll probably already know that there are a few options available to you. At My Car Credit, we want to make this choice easier with our no-nonsense lowdown on car finance options. Whichever option you choose, we are here to take care of it!

 

Personal Loan

 

In short: You borrow a lump sum from the lender to buy the car, which means you own the car from the start of your contract. You then repay this money (with interest) at a set monthly rate within an agreed time limit, usually between 24 and 60 months.

 

Pros:
– Your interest rate is fixed and lower than other options where your credit score is good
– Your monthly repayments are fixed, so you can budget around them
– You own the car from the start of the contract
– You can choose the time limit of the loan

 

Cons:
– Your interest rates can be higher if you have a poor credit score
– You are entirely responsible for the car and all repairs
– You have to borrow over £1,000

 

Ideal for people:
– Who want to own the car from the start of their contract
– Who want flexibility with their repayment structure
– Who are looking for lower interest rates

 

Eligibility:
Most people will be eligible to take out a Personal Loan. However, those with a bad credit score or those with a bad credit history (especially those that have CCJ court orders against them) may be declined.

 

At My Car Credit, we work closely with a number of trusted Personal Loan funders. 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

 

You put down a deposit on a car and the lender pays for the rest. You then ‘hire’ the car from the lender until you have paid off your monthly repayments, at which point the car becomes yours. Your monthly repayments are paid within an agreed time frame, usually between 12 and 60 months, and will differ dependent on how much deposit you put in.

 

Pros:
– The repayment time limit is more flexible
– Your interest rate is fixed, and will be lower depending on your deposit amount
– You are more likely to be accepted if your credit score isn’t the best

 

Cons:
– You don’t own the car
– You have to pay a deposit
– There can be additional fees (such as a transfer of ownership fee at the end of the contract)

 

Ideal for people:
– Whose finances and circumstances are suited to fixed monthly repayments
– Who don’t have the best credit rating
– Who want to own the car at the end of their loan
– Whose disposable income could change (e.g. starting a family, changing jobs)

 

Eligibility:
Hire Purchase agreements are one of the more accessible car finance options. Although not everyone is accepted, there is normally a broader spectrum that this option will cater for, i.e. credit profiles that range from excellent to poor, and several employment statuses, including retired, young professional and self-employed.

 

At My Car Credit, we have access to a large panel of lenders that offer excellent Hire Purchase agreements. 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.

 

Personal Contract Purchase (PCP)

 

You borrow the difference between what the car costs when you take out the loan and what it will cost at the end of the loan. This is called a Guaranteed Future Value (GFV). In other words, if the car costs £3,500 at the start of your loan and will cost £1,500 at the end of your loan, you need to borrow £2,000. The GFV also includes your estimated mileage as a factor. Normally this kind of loan will last between 18 and 48 months. At the end of your loan, you have three options: buy the car by paying what it costs at the end of your loan, give the car back and settle the loan, or part exchange for a new car.

 

Pros:
– Your options are more flexible at the end of your loan
– Service and maintenance packages, as well as warranties and insurance, are normally included
– You could drive a new car that you couldn’t afford with a cash payment

 

Cons:
– It’s more expensive than other finance options to buy the car outright
– Additional charges are made if the mileage agreement is exceeded
– You don’t own the car during the loan

 

Ideal for people:
– Who want to drive a new model
– Who frequently want to change the car they drive
– Who don’t want the responsibility of owning a car outright

 

Eligibility:
PCP is slightly stricter in terms of its acceptance rate. Normally, a fair credit score is required.

 

At My Car Credit, 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!