Car Loans UK

Car Loans – what exactly are they?

A car loan is a personal loan offered solely for the purchase of a car (this also applies to other vehicles). In most cases a lump sum of money is borrowed from a loan provider and you enter an agreement to pay back that sum, plus interest, in monthly payments. The car loans tend to be between £500 and £25,000 and can be paid back over a period of anywhere between six months and ten years.

Car Loans – what do I need to know?

The loan provider will charge interest on the amount borrowed. The interest rate can either be fixed or variable and will be based on the APR (annual percentage rate) that the loan provider offer.

The APR will differ from loan provider to loan provider and is wise to shop around as many providers as possible to find the best deal before committing to a loan agreement. The APR can also be affected by your credit rating.

Car Loans – what should I look out for?

There may be financial penalties for paying of the loan before the end of the agreement. This should be confirmed before signing.

Payment breaks may be available on the loan, however, interest will still be accrued and these breaks may make the total cost of the repayable loan amount rise.

In most cases, car loan repayments will need to be paid using a direct debit. It is important that you check that your bank offers this facility before applying.

It will also be possible to take out extra protection on the loan, this payment protection insurance will help you to cover the cost of the repayments in the event of unemployment, accidents, sickness or death.

Car Loans – what tips are there?

It is always important to find an compare as many car loans as possible before agreement is reached. You should also be confident that your credit rating is sufficiently high to enable you to obtain the best deals.

You should be wary of selling a car that you still owe money on. There are dealers who offer to pay of your existing loan before starting you on a new agreement. These deals should be approached with great caution as you will still be solely responsible for the outstanding amount.