How To Choose The Best Car Loan Option For You

By Author: Graham Filmer
Total Articles: 62
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There are a number of different options when it comes to car loan finance. You will need to find the right option to suit your financial situation so it is a good idea to take some time to research the finance deals available. Each choice will have its own pros and cons. To help you choose the best car loan for your situation, here is a brief explanation of the options available.

Personal Contract Plan (PCP)

This type of car loan is arranged through the dealer and allows you to pay a deposit upfront. This means that your monthly repayments will be lower. At the end of the term of the contract (typically two or three years) you will then be given several options. You can choose to pay one last final ‘balloon' repayment and then the car will be yours outright, or you could hand the car back to the dealer and walk away. If you want to hand the car back then it must be in good condition and meet the maximum mileage and servicing requirements as set out in the original contract. The main benefit of PCP contracts is that they offer lower monthly repayments. This means you will be able to afford a more expensive ...
... and newer car to drive around. This will also make it easier for you to upgrade your car every few years. However the main disadvantage of PCPs is that the interest payments can be higher overall and if you do not meet the mileage and servicing requirements then you will not be able to hand the car back. This means you will have to keep the car and pay the final balloon payment whether you want to or not.

Hire Purchase (HP)

Most people will be familiar with HP agreements as this is the most popular type of car loan available. HP is also arranged through knowledgeable dealers. In most cases you will also need to pay a deposit upfront but there will be no final balloon payment. The main benefit of HP is that once you have completed the term of the contract, the car will be yours outright. If you get a good deal then the rates can be quite reasonable and this can be an affordable way to get the car you want.

Personal Loan

The recent shake up in banking has meant that good deals on personal loans can be more difficult to access for borrowers. This means you will need to spend a bit more time looking around if you want to take out a personal loan to finance your new car. One of the drawbacks of personal loans is that often they can work out more expensive in the long run than dealer finance options. Personal loans also typically take a few days to organise with lenders whereas Hire Purchase arranged at the dealer is typically implemented the same day. However the benefit of personal loans is that if you do miss your repayments your car will not be repossessed (in most cases).

To find out more about how to get the car loan you can go online. This will allow you to compare rates and features quickly and easily and you will also be able to see the very latest deals available.