What Are Car Loan Rates Like in the UK?

There are multiple types of loans to pick from if you want to buy a new or used car and need to get car finance to fund your purchase. You will be obliged to pay interest on whatever arrangement you choose.

​​Car finance providers, banks, and dealerships all claim to offer the best car credit rates in the country. However, it's always a good idea to conduct your own research to compare which car finance package is best for your needs and finances.

Continue reading to learn more about your alternatives and the types of interest rates you can anticipate paying. 👍

What Are The Usual Car Loan Rates UK?

Basically, the interest rate determines how much you will pay the lender in addition to the cost of the car you want. The higher the interest rate, the more expensive your repayments will be. A solid credit score, as well as the amount borrowed, the term of the loan, and the size of your deposit, can all help you get lower interest rates. Essentially, you should investigate available options and seek out the deals with the lowest rates of interest. If you do this, you can ensure that your monthly payments remain low.

You will find some zero-interest car finance deals available, particularly on brand-new cars. Car dealers frequently use this as an incentive to entice consumers who would usually not be interested with cheap rates. To be eligible for 0% interest vehicle loans, you would have to have great a credit history and be able to clearly prove that you can make the monthly payments. You may also be required to pay a larger deposit and anticipate a short-term contract. And you may find that you don't get such a low purchase price for the car itself so do weigh up all aspects. 

A variety of factors might influence the interest rate you end up paying on your car loan.  As previously stated, cheaper interest rates are typically available for larger loans. As a result, if you just borrow a modest amount, you will almost certainly face a higher interest rate.

Your credit rating will also have a significant influence on the interest rates you are given. If you have a good credit score, lenders will regard you as a reduced risk and will be willing to lend to you at a lower interest rate. In contrast, if you have a low credit rating, then you will be considered a larger risk and you might only be able to obtain less competitive interest rate offers.

If you presently have a poor credit rating, it may be good to take action to improve it. There are several approaches to this. Get signed up to the electoral register, for example, if you aren't already. Maintaining your current credit repayments can also help you improve your credit score.

Check out our article on improving your credit score

How to Find the Best Car Loan Rates UK

We may be tooting our own horn here, but Carmoola is truly a game-changer in car finance. You do not need to fill out millions of documents or wait for an office to be open in order to apply. All you need to do is install Carmoola on your smartphone, enter your personal information, and do a fast ID check with your camera. The entire procedure will take less than five minutes, and you will receive an eligibility decision in less than 60 seconds!

Because everything is taken care of online, you can apply for car finance at any time.  We are prepared to give you a quick and easy car finance application process. It's never been easier to drive your dream car home. Do you want to know how much it costs to finance a car with Carmoola? To receive an estimate, use our car loan calculator!

Once accepted, you will get a virtual card that is pre-loaded with your cash, which you can use at any reputable dealership in the UK. 

Can You Guarantee You Get the Cheapest Car Loan Rates?

The first thing you can do to guarantee the ​​lowest car loan rates is to become acquainted with your credit record. One of the most important elements in deciding your car loan rate is your credit score - the higher your credit score is, the cheaper your rate will be.

You will be able to check your credit report online, and some banks give you a free monthly update. You can also check out your credit reports from each credit bureau for a more complete picture of your credit status (with TransUnion, Experian and Equifax).

Another tip is to not make too many credit applications within a short period of time. A hard inquiry is issued each time you actually apply for a loan. The FICO credit score algorithm, on the other hand, allows you to shop around for a vehicle loan within a 2-week timeframe. This is known as rate shopping, and it will not harm your credit score.

The Bottom Line

Getting the best car loan rate is as much about your credit rating and budget as it is about the lender you plan to borrow from. Before you apply, shop around and find out what the average interest rates are corresponding to your credit score.

If you want to get car finance for your next car, you should look for a loan with a low interest rate. First, consider the form of car financing you want: PCP, HP, lease, or personal loan. The next step is to explore the market for available solutions. You can use vehicle comparison websites to compare different lenders. Other factors include your credit history, deposit amount, and length of the loan arrangement.

Want to know how much you should budget each month to finance a car? Use the Carmoola car finance calculator! 😎