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If you don’t have the cash to buy a car outright, there are a few different ways you can finance it. Two of the most popular choices available via us are personal loans and hire purchase. We’ve run through how each of these car finance options work so you can find the one that’s right for you.

Personal loans

Personal Car Loans

With a car loan, you borrow a set amount from a lender to buy your car outright. You then pay off what you owe monthly, plus interest. We can check your eligibility for personal unsecured car loans to help you decide whether this type of car finance is right for you.

  • Borrow up to £35,000
  • Spread the cost over 1 to 7 years
  • Own your car from point of purchase
Hire purchase

Hire Purchase

Hire purchase (HP) is an arrangement that allows you to hire a car over a contract period. There’s sometimes an upfront deposit, then you pay for the car in monthly installments, plus interest. You can buy your car at the end of the contract or hand your card back to the dealership.


This type of finance is secured against the value of the car, meaning you can lose your car if you stop making your repayments. You won’t own the car until the final payment is made.

  • Borrow up to £200,000
  • Spread the cost over 1 to 6 years
  • Own your car after final payment
Personal Contract Purchase

With personal contract purchase (PCP), your monthly repayments take into account the fact that the car will fall in value over time. This means that the repayments can be lower compared to other types of car finance, although there is usually an upfront deposit.

You’ll have the option to pay a balloon payment at the end of your contract if you’d like to keep your car, or you can hand the car back to the dealership.

  • Borrow from £10,000 to £35,000
  • Spread the cost over 3 – 5 years
  • Own the car after the optional final payment is made

Still have questions?

What is a personal car loan?

A personal car loan is an unsecured loan which you can use to purchase a new or used car. With a personal loan, you borrow a fixed amount off a lender, then pay it back in monthly instalments plus interest over the loan term.

What is hire purchase?

With a hire purchase agreement (HP), the finance is secured against the value of the car. This means you won’t officially own the car until your last payment has been made. You’ll need to buy your car from a dealership that’s been approved by your chosen lender, then you’ll pay for your car in monthly instalments plus interest over the agreement term. Some lenders will need you to pay an initial deposit at the start of your agreement.

How much can I borrow?

The amount you’re eligible to borrow will depend on your credit history and personal circumstances. Typically personal loans range from £1,000 to £35,000 over terms of 1 to 7 years and homeowner loans range from £10,000 up to £2,000,000 over terms of 1 to 30 years.

For credit cards, all cards come with a minimum and maximum credit limit. The credit limit you’re offered will depend on your personal circumstances. If you’re not offered the maximum credit limit straight away, your credit card provider could increase your credit limit in the future.

If you’re searching for car finance, you could borrow up to £200,000 with a hire purchase agreement over terms of 1 to 6 years.

Which types of car finance can I check my eligibility for?

Here at Freedom, we can check your eligibility for both personal car loans and hire purchase agreements. If you’re eligible for both, you’ll see both options alongside each other in your search results. Checking your eligibility with us won’t harm your credit score.

What’s the difference between a personal car loan and hire purchase?

There are a few key differences between personal car loans and hire purchase (HP) agreements:

  • You can borrow more with HP – up to £200,000
  • HP is secured against your car whereas a personal loan is not
  • With a personal loan, you’ll own your car from the point of purchase, but with HP you’ll own your car once the last payment has been made
  • You might need a deposit with for HP, you won’t with a personal loan
  • You have more flexibility on where you can buy your car from with a personal loan
  • There may be mileage restrictions with HP while you pay off your finance

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