Are you ready for your first car or need an upgrade and
unsure of how to get the best finance deal? If you’ve never taken out finance
before, it can be confusing, and you don’t want to get ripped off! In general,
a better credit score, a bigger deposit and a shorter loan term can all help to
get you the best finance deal possible. Let’s explore each in more detail.
1.
Save up for a deposit
A deposit can be really beneficial for a car finance
deal. Some car finance deals require a deposit so it could be worth saving up
for a few months before you apply for finance. Putting more money down for a
deposit means that you don’t have to borrow as much from the lender and can
also lower your monthly payments too! If you’re struggling to get approved due
to bad credit, it can also help get you accepted as it shows good financial
responsibility to potential lenders.
2.
Raise your credit score before applying
It is trye that people with better credit
scores will be offered a better car finance rate. A better rate means you will
pay less overall. Your finance rate or APR is calculated based on your credit
score and the likelihood of you paying back your loan on time and in full. If
you are applying for bad credit
car finance you may have bad problems in the past with meeting repayment
deadlines. This makes you more of a risk to potential lenders. Before a car
finance application, you could consider raising your credit score to get a
cheaper deal. There are a few ways in which you can boost
your credit score
:
-
Pay all your bills on time and in full
-
Check your credit file for any mistakes and make
sure all your information is up to date
-
If you no longer have any active credit with
someone who has bad credit, its best to dissociate yourself on your credit file
-
Check for any fraudulent activity on your credit
file
-
Clear your existing debt before applying for
more credit
-
Register on the electoral roll
-
Build a credit history if you don’t already have
one
-
Keep your credit utilisation low by only using
under 50% of your available credit
-
Limit the number of finance or credit
applications you make in a short space of time.
3.
Choose a shorter term
When shopping around for car finance, many
people only tend to focus on the price of the monthly payment which can reduce with
a longer finance term. However, you will tend to pay more interest over the
term. Generally speaking, the shorter the car loan the lower interest rate you
will be offered. This is because opting for a shorter term usually means that
you are at lower risk of defaulting your loan.
4.
Sort your finance first
Many people still have the misconception that the
best way to get finance is through a dealership. However, dealerships only have
a limited number of lenders to offer finance. Using a car finance broker and
sorting your finance first before you get your car can be more beneficial. A
car finance broker can help you get the best deal possible, even if you have
been refused car finance in
the past. They put your application in front of a specialist panel of lenders
and find the most suitable finance deal for you. You can then take your finance
deal to any UK dealership approved by the Financial
Conduct Authority.
5.
Refinance when you can
Many people with bad credit also use a car finance
deal to help increase their credit score. By opting for a higher rate at the
start of your finance deal and then meeting your repayment deadline each month
and in full, you can help to increase your credit score. Then when you’re halfway
through your credit agreement, you can choose to refinance. Refinancing a car
loan can reduce your monthly payments, lower your interest rate, and allow you
to remove or add someone to/from your policy and increase or decrease the loan
term length.
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