Your Credit Score & Car Finance in the UK


Buying a car is always both stressful and exciting, but if you are thinking about financing a car with a loan it is even more so. Financing a car with a personal or bank loan can be a cheap way to borrow money. If you know what you are getting into and do your research, you can find a great rate. Though there are always pros and cons, by understanding both you will be able to borrow the money you need without paying outrageous interest rates. 

Shopping Around & Applying for Loans

It goes without saying that the better your credit score is, the lower your interest rates will be. It is always a good idea to shop around for the best annual percentage rates (APR). This includes interest and all of the lender’s other charges. You should look into it before you go to a dealer. This way you can understand how much you will be able to borrow and at what rate. 

It is best to only apply for loans you are confident you will get. Even applications will affect your score. The company lending to you will want to check if they can trust you to pay the money back. Limit the impact on your score by using an eligibility calculator. If you’re not able to get a rood rate, you should do your best to increase your credit score before you apply. 

Raising your Credit Score

Raising your credit score is easier than you think, and you should definitely do your best to get it in good shape before you apply for car finance loans. According to the site MoneyPug, which is used to find car finance deals in the UK, when you register to vote your credit score goes up. Even if you have no interest in voting you can use it as a way to increase your credit score. 

Paying back all the money you owe as soon as possible is the most efficient way to raise your credit score. First, take a look at your credit score from all three bureaus. Then determine what you need to do to get your score in better shape. Always do your best to increase your score. There are many ways to do it. Before you even apply for a loan, make sure your credit is the best it can be. 

How your Credit Affects Car Finance

Several types of car finance options are available when you are interested in purchasing a new vehicle. Your credit score is a tool used by lenders and credit agencies to give you an indication of how likely you are to get a loan. This does not mean that your score perfectly represents your chances. Credit bureaus are made up of people and people make mistakes. Your score from credit agencies aren’t always correct. Do your best to refute specific lines on your score and make sure your credit score reflects the reality. 

Different Types of Loans

There are a few ways to get a loan for a car, and if one method doesn’t work another might. Of course you should see to it that you can actually afford the payments—being able to pay the money back as soon as possible is the key factor in debt and credit. Always pay your loans back immediately and you will have the ability to take advantage of these loans.

A personal loan is one way to get funding, and they can be arranged with a bank or building society. These vary in terms of repayment and interest. Depending on the amount you need to borrow, the lender will decide on your payment periods and interest. 

Hire Purchase (HP) loans are a fairly straightforward agreement in which you pay monthly after an initial deposit. This is over a fixed period, and you will not own the car until your final payment is made. This can be good for people who want to make sure they pay the money back and stick to the agreement. 

Finally, one of the most popular ways to get finances for a car is to take out a Personal Contract Purchase (PCP). While it is more complex than a HP loan, the monthly payments relate to the depreciation of the car’s value. Starting with a deposit and a fixed term, you can also pay a balloon payment to own the car. 

There are many moving parts to taking out a loan for financing a car in the UK. Luckily this means that there are many methods to get the money you need. Be steadfast and find the right loan for you and you will be driving your new car in no time. 

Written by Lewis Shaw

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