When it comes to buying a car, most people will want finance. There are a number of different options to consider and deciding on the best option is just the first step that you need to take to get car finance.
Choosing Your Finance Type
There are pros and cons to each of the different types of car finance and you will need to go through each of them. While one type of finance will work for one person, it will not work out well for another. This all depends on the deposit required, the type of monthly payments and the level of interest rate.
Generally speaking, a hire purchase will have a higher level of interest rate than a bank loan; however, it is commonly easier for someone with bad credit to get car finance with a higher interest rate.
Decide on Your Budget
You need to determine the amount that you want to borrow. This can affect whether you will get the finance or not and will affect other, important factors. First of all, the amount that you have will affect the amount of interest that is added onto your loan – the more you take out, the more interest will be added on. Secondly, it will affect the amount that you need to pay each month.
Decide on Monthly Payment Amount
Knowing how much you can afford is extremely important when you come to get car finance. You should know how much you can afford for the monthly payments – this should be comfortable and not stretch your budget. There are two tricks to lowering the monthly payments if you need to – either lower the total amount of the loan or stretch out the length of time that you take it out for.
Taking the loan out for a longer term is not always the best option. This will mean that you have a loan for a longer period of time – so you risk running into financial difficulties – and you will find that more interest is added on, so you may more in the long term.
Get Car Finance With Bad Credit
It is possible to take out some form of car finance even if you have a bad credit rating; however, you will not get the best interest rates available. Start off by talking to each of your lending options to find out whether they will entertain you firstly. Once you find the places that will consider bad credit loans, it is time to look at your bank statements. Show proof that you can afford the monthly payments – such as showing the amount you have going in and coming out of your account.
Not all lenders will accept this, since it is liable to change. If that is the case, you may need to find a co-signer or a guarantor. Find someone with a better credit rating than you and someone who you can trust. Come up with an agreement between the two of you – a co-signer will be at risk of paying the loan if you cannot.