A Guide to Getting a Car Loan in The UK

So the time has come to buy a new car. Perhaps you're upgrading to something a little bigger or after a more zippy model. Whatever your reason for buying a car, many drivers purchase their new vehicle with finance in the form of a car loan. This guide has everything you need to know about getting a car loan in the UK, so you have all the information available to decide how to pay for your next vehicle. 

Where Can I Get a Car Loan in the UK?

Finding the best car loan provider in the UK can prove tricky, so it's essential to do your homework before making an application. You can finance a vehicle directly through the car dealership, which might be a good option for some. But it's important to remember that dealers and manufacturers often raise car pricing to provide what looks like discounted financing to allure buyers. That means the car is more expensive, even if the loan seems lower. Another option involves going to the bank, although it's hard to secure a loan with a bank if you have poor credit or have previously been declared bankrupt. Many bank loans also come with high-interest rates. Thanks to technology, you can now apply for a car loan online with a specialist lender. The online route often provides a better, more fluid service, as well as faster access to funds. In many cases, you can get accepted for a car loan within minutes using an online lender like Carmoola

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What Different Types of Car Loans Are There in the UK?

There are four primary options you can choose from when it comes to getting car finance in the UK. Each has its pros and cons, with drivers selecting the finance that best suits their needs. For some, that means taking out a hire purchase agreement on a vehicle, where you pay monthly instalments until you own the car outright. Alternatively, you might opt for a personal contract purchase, which involves paying monthly instalments and final balloon payments to own the car or handing back the keys instead. Another option includes leasing the vehicle, although you never own it outright when going down this route. Lastly, there's the option of a personal loan, which involves borrowing the entire amount for the car upfront and paying it off monthly until the balance reaches zero.

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Do Car Loans Have a Fixed Interest Rate in the UK?

A fixed interest rate is when the interest stays the same throughout the duration of your car finance contract. This differs from variable interest rates because the interest never changes even if the market fluctuates. Generally speaking, most car loan agreements are on a fixed interest rate. So if the national rate goes up, your interest stays the same unless you refinance. A fixed interest rate offers plenty of benefits because you'll know the exact amount due each month and won't have to worry about that number changing at any point.

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What Are Car Loan Rates Like in the UK?

Regardless of the car loan, you'll need to pay interest rates. How much you pay depends on several factors, including the product from the lender, how much you borrow, the length of the loan and your credit score. The interest rate determines how much you will pay the lender in addition to the cost of the car you want. Some lenders offer 0% interest deals, where you don't pay any interest, only the loan amount. Others can be as high as 20%. Ultimately, it's about finding the best deal for your requirements and searching the market to see which lenders offer the most appealing car loan deals.

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How To Compare Car Loans in the UK

Before getting a car loan, it's worth comparing the options available, so you have a good idea about interest rates and which lender offers the overall best deal. One of the best ways to do this involves using a comparison website, where you enter your requirements and see which options meet your criteria. Compare the Market, Go Compare, Finder and Money Supermarket are the best comparison websites. You can also use Carmoola to view our competitive rates and enjoy a super easy process to get a car loan. 

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Can I Get a Zero Down Payment Car Loan in the UK?

A down payment, also known as a deposit, is how much of your own money you spend on the car. For instance, if the vehicle is £8,000 and you have a deposit of £2,500, you would need to borrow the remaining £5,500. There is, however, no-deposit car finance, which allows you to drive off from the dealership with a brand new (or used) car without paying any money whatsoever. It sounds too good to be true, but these types of agreements let you buy a vehicle and delay the payment for 30 days. You're essentially getting the car before you've made the first repayment amount for your loan. There is a drawback, though. Most no-deposit finance options are more expensive in the long run because you need to pay more over the term of the loan, and the interest rates are higher.

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