Car finance, personal loans – when it comes to purchasing a car, there are a number of ways that you can finance it. But is car finance easier to get than a loan, and how do these agreements differ? In this article, we’ll provide answers to all these questions, helping you to get in the driver’s seat (literally and metaphorically)!
Car finance vs. a loan – what’s the difference?
First up, you need to understand the difference between a loan and car finance. A personal loan involves borrowing money from a bank or other financial institution. You’ll typically repay this over a pre-determined series of monthly instalments (plus interest). Meanwhile, a car loan is a type of personal loan, but is for the specific use of purchasing a vehicle (as the name suggests).
Car finance is when either a financial institution or lender gives you a loan to finance your car. You’ll then pay this loan off with a series of monthly instalments (plus interest).
There are various different kinds of car finance. The right kind of car finance will vary between drivers, all of whom have different needs and preferences – for example, whether or not you want to be the vehicle’s owner, whether you can manage mileage and other caps, whether the agreement is secured, and the length of finance term and interest rate that you may face.
There’s a real difference between these types of car finance, but the two most popular are HP (hire purchase) and PCP (personal contract purchase).
Car finance vs. a loan – which is easier to secure?
A personal loan
There are advantages to funding a car with a car or personal loan. If you choose to do so, you’ll be seen as a cash buyer by a dealer, meaning you’re unlikely to face a deposit or any balloon payments. Unlike certain car finance agreements, personal loans are unsecured, meaning that you don’t have to put up any assets in order to secure them. With a personal loan, you’ll also be the legal owner of the vehicle, meaning that you can sell it whenever suits you.
When it comes to personal loans, it may be tempting to opt for longer repayment schedules, but be aware that this does mean you’re going to be paying higher interest costs overall as a result. It’s important to be reasonable in establishing your loan period, keeping monthly payments affordable whilst sticking to the shortest loan term you can get.
Whilst you can secure personal loans from a variety of banks and institutions, the sheer availability of loans might make shopping around to find the best one for you feel overwhelming. Typically, online car finance providers like My Car Credit will be able to do that work for you, providing a no-obligation quote that takes account of your needs and circumstances in mere minutes.
Be aware that personal (or car) loans will be credit score-contingent. Applicants with higher credit scores are going to be favoured more, and there’ll be less chance of securing a loan if your credit score is poor. For those of you who sit in this category and are looking for ways to finance a car, it’s likely to be easier to secure car finance than a loan.
So, is car finance easier to get than a loan? Depending on your credit score, it may be easier to secure car finance than a personal loan. Many car finance providers like My Car Credit can help you to find car finance even with a poor credit rating, and initial credit checks tend to be soft searches – unlike with a personal loan.
The process of finding and securing car finance is also significantly quicker than when trying to locate a personal loan. Online application processes make your search quick and easy. They’ll also provide you with an almost immediate sense of the kind of finance term you may be eligible for.
Bear in mind, too, that because car finance is often a secured loan – meaning that the car is used as collateral – it can be easier to get than a personal loan. However, usually you will have to pay a deposit (typically around 10%), and if you fail to make your repayments in a timely manner, you’ll lose the car.
Start your car finance journey today
If you’re looking for an easy, flexible and affordable way to purchase a vehicle, get in contact with My Car Credit today on email@example.com. We can discuss your car finance needs and help you find an agreement that suits you.
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