Is a Bad Credit Car Loan The Best Option for You?
Financing a car has become one of the most common form of loan in this day and age, as a majority of the cars on the roads are financed. With affordable monthly repayments making it easier than ever to gain access to cars, there are many wondering if it is still possible to finance a car with poor credit. In this article, we will be looking into whether or not a bad credit loan is the best option for you.
Understanding Your Credit Score
When applying for a loan of any type, it is important to look at your credit score and fully understand it. By checking your credit score and monitoring the impact that outstanding debt can have on this, you are then able to monitor your finances as a whole. Understanding your credit score and the impact that each enquiry type could make , will aid you in choosing the loan type best for you.
Consider The Loan Types
In addition to understanding your credit score, it is important to consider the other loan types that you have available to you when purchasing a car. To help you fully understand the loan types that are available to you, we have provided a helpful breakdown.
Hire Purchase Loans
A Hire purchase loan is a loan type that requires the buyer to pay a deposit for the loan, often around 10%, to secure the loan on the car. The loan is secured against the car and is set up by the car dealership or the broker that you are purchasing from. In addition to this, you can own the car at the end of the payment type should you wish to.
Bad Credit Car Loans
Many people assume that those with poor credit are unable to finance a car. This is simply not true. With bad credit car loan companies, you can have access to the financial aid you need at affordable repayments. They are fundamentally the same as other types of car finance companies however, they will consider applications from those with a lower credit score. Where most companies will look at your credit score, there are some car finance companies that will look at your ability to make payments on time by focusing on your monthly income to build your affordability for the car that you want to finance.
Personal Contract Hire
In addition to bad credit loans, there are alternatives such as Personal Contract Hire finance, that enables you to lease the car from the dealership. If you are not planning on purchasing the car at the end of your finance, this could be one of the cheaper options to finance a car. This will be determined between you and the dealership or broker and will enable you to drive the car that you want and return it at the end of the contract, you can then begin the process again with another car that you want.
Look At The Annual Repayment Rates
It is always important to look at the annual repayment rates when determining which loan is right for your needs. This can determine your ability to pay back the loan on time and how affordable the monthly payments can be. . This can help prevent financial difficulty moving forward and ensure you can afford the car that you want.
Whether you are looking to finance a new car at this time, or you are coming to the end of your finance option, several loan types can benefit you in the long term. Which of these will you be choosing?
- By Soubhik