Car Loans

Car Loans

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We all search for the perfect deal when it comes to buying a car. It is ironic then that many of us don’t search for the best finance deal to go with it. This guide offers some simple tips on where to start.

Representative 15.9% APR (Variable)

Representative example: If you borrow £7,500 over 5 years at a Representative APR of 15.9% and an annual rate of 15.9% (fixed) you would pay £177.82 per month. Total charge for credit will be £3,169.20. Total amount repayable is £10,669.20. Minimum repayment period is 12 months. The %APR rate you will be offered is dependent on your personal circumstances. Freedom Finance is a leading credit broker and not a lender.

What agreement types are available?

Hire Purchase (HP)

This method of credit means that the car can be taken home and paid for over a fixed monthly repayment term. The car is not legally owned until the last payment has been made.

Personal Contract Purchase (PCP)

A personal contract purchase , or lease agreement, starts with a large deposit that is followed by lower monthly repayments. At the end of the lease term there are 2 options. Either pay a large final ‘balloon’ payment, after which the car is yours, or give the car back to the lender as a deposit for a new vehicle.

Unsecured loan

An unsecured, or personal loan, can be taken out to purchase your car. This type of borrowing can be easily budgeted for as the money is taken out over a fixed term and is usually repaid at a fixed interest rate.

Second Charge Mortgage

This type of borrowing secures the money owed against your home. Once you have thought about the best-suited car lending for you, take a look at the tips below to help you choose the best deal.

Tips on car finance

Explore your options - Just as you search the Internet for the perfect car, why not shop around for the right car finance?

Research standard loans vs car finance

Loans can be taken out for a range of purposes, including a car purchase. In fact, a loan provider may offer a more favourable interest rate than a car dealership finance agreement.

Check the repayment structure

Do some market research. Some lenders may offer lower APRs to those borrowing over a certain threshold, so it may be worth borrowing slightly more than you need, for other purchases you may wish to make, in order to qualify.

Consider the repayment period

A long repayment term may seem attractive at first, but don’t forget that although the monthly payments are less, the overall cost of the interest is likely to be higher.

Don’t be afraid to question the dealer

A dealership may offer you a deal on the car, such as a discount or added extras, on the understanding that you sign up to their hire purchase scheme. It may be that the deal is legitimate, but always ask what the cost of the car would be without the HP agreement before making your decision.

Think about how long you plan to keep the car

Bear in mind when taking out a loan that a car depreciates over time, and if you decide to sell the car before your loan term has expired, you will need to pay the remaining balance of the loan. If you usually change your car every 3 years, it may be cheaper for you to look into a car leasing scheme (PCP) rather than a hire purchase agreement.

Look out for additional costs

Set up fees and early settlement charges can be a common feature of car finance. Make sure that you check the agreement fully before accepting the loan. If you decide to go for a PCP agreement, keep in mind that an additional cost will be incurred should the agreed yearly mileage be exceeded. Make sure that your chosen deal suits your individual circumstances.

Need guides to borrowing?

Our aim at Freedom Finance is to provide you with the information you need to make educated decisions when it comes to your borrowing and your money. The online financial market place is filled with conflicting, jargon-filled information about which loan product is the right one for you.

These deals may look attractive, but many of them apply only to those with an outstanding credit history. In reality, the best deal on offer might not be available to you. With our comprehensive finance guides, we aim to equip you with the know-how to make the best decisions about your borrowing and your money.

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Whether you're planning on some home improvements, replacing your car or simply getting your finances in order, a loan from Freedom Finance could be more affordable than you think. Use our calculator above to find the ideal loan for you. All quotations given are for illustrative purposes only. Credit subject to status. The rate you are offered will depend on your personal circumstances, credit assessment procedures and other related factors.