How To Compare Car Loans in the UK

Car finance allows people to buy cars that they would not be able to afford otherwise. Typically, you'll make a down payment, followed by monthly repayments, with interest, over a certain period of time which might range from one to five years. 

The length of the period you go for will affect the amount of your monthly payments. A longer term implies cheaper monthly payments, but it may cost you more long-term since you will pay more interest altogether.

In this article, we will compare car loans UK and see which interest rates you can go for. Let's go! 😊

Compare Car Loans UK

There are a few options for financing your car purchase. The following are the most common car finance types:

• Getting a personal loan
• Going for Hire Purchase
• Getting a Personal Contract Purchase loan

You don't need to go through your car dealership to obtain a car loan, you can choose to get one from a car finance provider (like us here at Carmoola), a bank or a building society. 

You decide how much you want to borrow and the predetermined amount of time you have to pay it back (which is called the loan term), and you'll make monthly payments until you've returned the loan in full, plus the interest.

The best choice for your circumstances will be one that allows you to buy the car of your dreams without too much added cost. Remember to factor in the deposit required as well as the amount of monthly repayments.

If you're considering a personal loan, you'll need to have a high credit score to qualify for lower interest rates; otherwise, it might just be far too expensive.

How to Compare Car Loan Rates

Have you found yourself frantically typing “compare interest rates car loan calculator” into Google to see if a car finance deal you were offered is good enough? We’ve got you covered. Before we compare interest rates from the most common car loans, let’s go into a few criteria you should be aware of in order to compare car finance offers. 

• Check that your circumstances qualify for the loan. It is pointless to apply for a loan if you do not fulfil the lender's basic standards. These requirements can be found on the lender's website or in internet reviews.
• How much are you able to borrow? Is the lender offering a loan that covers the whole cost of a car you want and can afford?
• Look at the interest rates and check whether or not they’re low enough. A high minimum stated interest rate isn't a great sign, and a lender that refuses to reveal interest rates is much worse. It might indicate that interest rates are so exorbitant that the lender would prefer not promote them.
• What is its web reputation like? Scrutinise review websites to check what others have to say about the car finance providers you're interested in. Trust Pilot is a good one to use for honest reviews. Are interest rates now high? Are folks having difficulty making payments? Escape if something seems suspicious.
• Are there any additional costs? In addition to the costs charged by the dealership and the government, some lenders impose fees for car finance.
• What is the loan term? Is your lender providing terms that you can realistically afford after accounting for APR and other fees associated with purchasing a new car?
• ​​What kinds of services does it provide? Some lenders will hold your hand during the financing procedure, while others will not. Consider getting guidance if you don't know what you're doing, but also inquire whether the lender is truly helpful or just forcing you into purchasing their offering.  
• How much is the provider asking as a down payment? A deposit of approximately  10% is typical, although some lenders need more. Choose a lender who gives a deposit that is within your budget.
• What are the lender’s early repayment terms? Paying off your loan early might help you save money on interest. However, many lenders may charge you a fee, such as one month's interest, if you repay your loan before the end of its term. You should consider each of the financing choices given below.

What Do You Need to Apply For Car Finance? 

When applying for a car loan, you will have to have at least two different proof of identity documents, proof of your income, and three years' worth of your address history on hand.

Remember that when you apply for car finance, you will be subjected to a hard credit check, so you may want to take a look at the status of your credit score before determining which option is suitable for you.

Check out a full guide on how to apply for car finance and the documents you will need.

Compare The Market Car Loan UK

There are lots of different tools online you can use to compare car loans in the UK. Before we look into them, we just wanted to show you our car finance calculator which will help you a lot when planning for car finance. 

Before you buy a car with financing, you'll want to understand how much it is all going to cost. The simplest method to accomplish this is to use a vehicle financing calculator, which will tell you how much you may borrow in addition to the cost of monthly payments.

​​When calculating car finance using a calculator like ours, keep in mind that the amounts you see could be subject to change and do not constitute a price or offer. They are intended for demonstration purposes, allowing you to experiment with how to estimate vehicle financing payments.

Check out the Carmoola car finance calculator

If you’re interested in comparing different interest rates from different car finance providers, you can go for different comparison sites like:

• Compare the Market
• Go Compare
• Finder
• Money Supermarket

Takeaway

It's alright if you're feeling a little overwhelmed right now; we entirely understand. It can be stressful to have to make all of these choices and make sure you're going for the best solution. However, it is truly a question of preparation and proper research, so as long as you don't make any rash judgments, you'll be absolutely fine. 

To gain a better understanding of how much your car finance payments will be, use Carmoola to calculate your budget. The process is really effortless, all you'll need is a picture ID, preferably your driver's licence. Everything is done online, without the usual mountains of paperwork you'd usually get at a traditional car finance provider. 

We also have a handy blog with lots of tools to help you and loads of other resources like our car finance calculator which we talked about earlier. Welcome to the wonderful world of car finance! 🚗