Can I Extend My Car Finance Repayment Term?
Are you looking for help in buying your dream car? It's such an exciting time! Applying for car finance is the very first step to buying that fantastic car you've seen and now really want. Most consumers cannot afford to pay for a new car entirely and must instead rely on car finance. These contracts, like any other type of loan, have restrictions and requirements that applicants must follow.
The term length in car finance refers to the duration of your contract or payback period. Car loan terms are typically between 24 and 48 months. But is it possible to change that? Can you extend car finance? Let’s find out!
How Does Car Finance Work?
What is important to know about car finance is that there are several different sorts of loans available: you can choose from hire purchase, PCP (Personal Contract Purchase), lease, and personal loan.
Personal loans can be used for any reason other than purchasing a car. You can apply for a secured loan, which requires security such as your vehicle, property, or something else of worth.
Unsecured loans are also available; but, if you fail to repay the loan, the finance provider may confiscate any of your assets to recoup their losses. Interest rates on a personal loan are also higher than on secured loans since the lending firm is taking a risk without asking for any collateral, and you will need a very good credit score.
A personal loan is suitable if you're looking to purchase a vehicle outright and want to keep it for quite a while. Additionally, If you don't want any mileage restrictions, or restrictions on making changes to the vehicle. this form of car finance is also an option you might consider.
If you want a straightforward car finance deal, go with a Hire Purchase agreement. You will usually pay a deposit of 10% of the car's worth, (although you might also be able to find a zero deposit deal) and then you pay the lender a specified sum every month. This continues for a predetermined period of years, usually around three to five.
The day you make the final payment, the car will be yours. The monthly repayment sum for Hire Purchase is larger than for a PCP arrangement because you are paying for the full cost of owning the car. The good news is that at the end of the agreement, you will own the car outright. There is usually no balloon payment as there is in a PCP deal. Choose this kind of car finance if you want to own the car eventually, don't want ant mileage restrictions, and can manage the repayments.
Personal Contract Purchase (PCP)
Another kind of car finance that many consumers choose is PCP. You will have to pay a deposit, which is usually around 10% of your car's value, a set interest rate, and predetermined fixed monthly payments. You can select the financing period that suits you best, like 12 months or 36 months. Most agreements don't go any further than the 5-year mark.
Because the agreement provides you with three final options, PCP contracts are a fantastic solution for those who are unsure what they will want to do with the car in the near future. The three options are the following: returning the car, keeping it by paying a final balloon payment or trading it in for a replacement.
If you want to return it, there are no additional fees unless there is damage or you have exceeded the mileage limitations. If you want to keep the car, you'll need to make what is called a final balloon payment so that ownership can be transferred to your name and not your lender.
Can I Extend My Car Finance?
When you apply for car finance, or look at refinancing, you should carefully evaluate your term length. Extending your repayments over a longer period reduces your monthly expenditure, but the overall amount cost rises as you pay more and more interest over a longer term.
When you go for a shorter loan term, the overall cost of interest is lower since you repay the loan over a shorter period of time, but your monthly payments are greater.
To choose the appropriate term duration for you, consider when you plan on swapping your car for another one. If you want to replace your vehicle every one to two years, make sure your term matches this.
If you can no longer afford your current monthly car repayments you might be asking, can I refinance my car for a longer term? Yes, you may be able to refinance over an extended time if your situation changes and you want to modify your term length and decrease your monthly commitment. The age of your car might also influence a lender's decision to finance over a longer period.
If you need to prolong your loan term, pay off the finance agreement sooner, or change your monthly payments, you should contact your lender ASAP to explore your choices.
There is no certainty that your loan will be extended, as it depends on your lenders' decision. However, if you are having difficulty making the payments, they have a duty to ensure that you are treated fairly. As a result, they should be able to assist you in finding a cost-effective solution. Some other options include:
- Frozen or reduced future interest
- Certain charges could be suspended or postponed.
- Lowering your monthly payments for a specific period of time
- Some lenders may also allow you to take a payment holiday. This enables you to skip payments. This can normally be scheduled over the phone, in person, or online, depending on your car finance provider.
The Bottom Line
A loan extension or payment vacation will not normally appear on your credit record, depending on the terms and conditions of your loan. A lapse in your payment history, on the other hand, may be problematic for your credit record.
It is critical to enquire with your lender about how this may affect your credit score and capacity to obtain credit in the future. Depending on the terms and circumstances outlined in your loan agreement, this may differ from lender to lender.
Still not sure how to finance your car? Carmoola also provides simple and effective online car finance. Simply download the app and follow the application instructions. You'll know within minutes if you qualify for a loan with us!
Please do not hesitate to contact us if you have any questions. We'd be delighted to help! 😀