Common Misconceptions About Car Finance
Are you hesitant to get car financing? 🤔 Many car buyers miss out on great deals because of common misconceptions about car finance. Some people are too worried about it or are simply convinced that they won’t get approved if they apply. But the truth about car finance is it’s quite easy and straightforward to apply for a loan these days.
What are common misconceptions about car finance?
People often think that they need a huge down payment in order to get approved for financing. While this may have been true in the past, it is no longer the case today. In fact, many lenders now offer 100% financing, which means that you can get a car loan without having to put any money down at all. In this new age, many finance companies process applications online, making it convenient and fast for car buyers to get the vehicle they want.
However, you must fully understand your responsibilities as a borrower when getting car finance. You should be aware that if you do not make your repayments as agreed, your car may be repossessed, and your credit rating could plummet. In worst cases, the borrower might even get a County Court Judgment if the lender takes legal action. But if you make payments on time, every time, then there's nothing to worry about.
If you are hesitating or are worried about applying for car finance, this article is for you. After reading it, you’ll hopefully be more confident and knowledgeable about car finance. And when you're ready to apply for car finance, you'll have a stress-free experience!
All Car Finance Agreements are the Same
This couldn't be further from the truth. The reality is that there are many different types of car finance products available, from leasing and hire purchases to personal contract purchases and personal loans. However, the best way to find the right finance product for you is to compare all of your options and use an online car finance calculator to work out which one offers the most affordable monthly repayments.
You Need to be 21 to Apply for Car Finance
So, maybe you’re a young driver who’s only 18 years old. You now know the freedom and excitement that driving brings, and you can’t wait to have your own ride. Many people believe that you need to be 21 before you can apply for car finance. This is not true at all. The minimum age requirement is 18 with some lenders, although being 18 years old doesn't guarantee that you'll be approved for finance. There are other factors that the lender checks to see if you're eligible.
What are the basic car finance application requirements?
When you do apply for car finance, you'll often need to verify your identity with your driver’s licence. A lot of car finance companies look for this as a basic requirement. While they may also accept other IDs like passports, having your full driving licence will show the lender that you’re legally allowed to drive. Other documents you need to have ready would be your proof of address with the utility bills or bank statements, details of your employment, and also, be sure you’ve already registered on the electoral roll to vote.
Can I get my parent to be a guarantor for car finance?
If you’re not working yet but want to get car finance, some lenders may accept a guarantor to help you out. This also might help if you have a limited credit history due to your age. Your guarantor can be your parent, but they will need a good credit score themselves. They will be the ones responsible for paying the monthly repayments if you’re unable to. You may decide to discuss with your parents how you will pay for the car. As long as you can keep up with the payments to the car finance company, then you’ll be alright, and you can continue to enjoy driving your car.
You Can’t Get Financing with a Bad Credit Score
You may have been through some difficult financial situations in the past, and they’re now recorded in your credit report. However, that may not necessarily stop you from getting car finance. While your credit score can affect your application and the rate you're offered, it’s not the only thing the car finance company evaluates. And there are some companies out there that specialise in offering loans to people with low credit scores. If you're having some difficulties, it can sometimes help to engage a car finance broker to help find a good lender for you.
How can I improve my credit score?
Your credit score will not stay the same forever. It can change, and you can definitely do things to improve it over time. Start by checking your credit report. There may be errors there that are dragging your credit rating down. You can have that corrected if something is not right. It will also help your credit score if you always pay your bills on time. The sooner you start doing this, the sooner you’ll see your credit score improve.
When it comes to getting a better credit score, know that it will take some time. But it will be worth it because you’ll have the chance to get finance deals with better interest rates. It means that you could be paying less on interest when you finally get car finance or any other finance you may need. However, if you don’t want to wait, check out some car finance companies that do grant financing to applicants with a bad credit rating, albeit with a higher interest rate. So be sure to choose the best lender to offer you a good deal, which might mean shopping around a bit before you decide.
Car Finance is Only for Brand New Cars
Many car buyers actually prefer second-hand vehicles to new cars. Used cars can be much more affordable. If you pick the right one in great condition, you'll enjoy it as much as getting a brand-new vehicle. Maybe you’re hesitant to buy a second-hand car because you think car financing is only available to brand-new cars. This is another common misconception.
Can I get car finance for a used car?
Car finance companies can help you buy almost any car you want, whether new or used. There are just a few additional steps to take if you buy a used car. For example, you should try to do your own checks on the papers and documents, the car’s performance and condition, history, etc. You may need a mechanic to help you assess the vehicle before buying it. Other than that, you can absolutely get car finance for a used car.
We'd highly recommend you run an HPI check as a must on any car you want to buy, whether with finance or not! An HPI check helps to see if the vehicle is stolen, has outstanding finance owed or has other issues that you will wish you'd known about!
You Can Modify the Car Since You're the Owner
When you get car finance, you get to buy the car you want, use it, and enjoy it. Nonetheless, it is still not fully yours until you pay the car finance company. While you’re still paying for the car every month and are the registered keeper, the lender actually owns it. There are very few modifications you can do. To be safe, don’t change anything until you have all the papers that show you’re the owner.
Once you’ve paid the last hire purchase payment or the final PCP balloon payment and received the documents, you can modify the car to your heart’s content. You can upgrade certain parts, apply new paint, put in new accessories, and so on. You now have all the freedom to make the car truly your own.
As you can see, car finance doesn't have to be daunting. If you find anything confusing, don’t hesitate to ask us at Carmoola! We’d be happy to help you. Also, check out our other informative articles on the blog. We’re here to make car finance more accessible to everyone.
If you want to know how to apply for car finance, here's how Carmoola works! You're only a few clicks away from enjoying the experience of driving your own car.