Financing Options Interest-Free or 0% Finance Car Loans
Some lenders advertise interest-free or 0% finance car loans. Youfre required a sizable deposit, which may be as much as 50% of the carfs value. These kind of loans are normally only offered for new car models and restrict the usual leeway you have with your car dealer for negotiating the final price. In all likelihood, youfll be paying the full list price for the car. Also, the repayment periods are usually set at 12 months. If the agreed term passes and there are still repayments left, youfll be required to pay at a very high interest rate until the remaining amount is settled completely.
Bad Credit Loans
As banks and building societies are generally conservative when it comes to loans, it can be difficult to borrow money unless your credit history is relatively spotless. Or you may have incurred serious debt problems such as a County Court Judgement or missed mortgage or rent payments. Each of these instances will be reflected on your credit history for six years and will affect any loan application you might make, regardless of your current financial standing.
Fortunately, there are loan companies that specialise in bad credit car loans. They will evaluate you for a loan primarily on the basis of your present financial situation, not on your credit history. Your credit rating is still a factor, however, and a bad rating will mean that you will be assessed as a high risk, resulting in higher interest rate charges.
Car Title Loans
Car title loans are a type of Hire Purchase. The rate of interest may either be fixed or variable, and are arranged by your car dealer. There is a required deposit of around 20% of the carfs value. The term of the loan is usually between two to three years of monthly payments.
Repayment periods are generally shorter compared to other forms of car loan financing so the interest tends to be much higher. Keep in mind that since this a form of hire purchase, the title stays with the company and you only receive actual ownership of the car upon the final monthly repayment.
Classic Car Loans
A number of companies specialise in arranging loans for historic or classic cards. The loan can also be for the restoration of the car, not just for buying it. Classic car loans are usually secured against your property and the amount you can borrow is higher compared to regular car loans (from 1000 to 500,000).
If you opt for an unsecured classic car loan, youfll be offered a lower amount to borrow and the interest rate will be much higher.
Used Car Loans
The APR on used cars will almost always be higher compared to new cars. However the repayment periods are usually much shorter since used cars can be significantly less expensive than new cars. The exceptions to this are rare and classic cars which are always highly valued, depending on the condition.
Always check whether your car dealer belongs to a trade body like the Society of Motor Manufacturers and Traders to ensure that they comply to motor industry Code of Practice. This is especially important in the case of purchasing used cars and you will want to be certain that your rights as a consumer are recognized should problems arise down the road.
Personal Contract Purchase
New cars may be bought through a Personal Contract Purchase (PCP) which is a form of financing organised by the car manufacturer or dealer. This will require you to give a deposit and agree to a MFGV or minimum future guaranteed value of the car, or in other words the value the dealer estimates the car will be worth by the end of the contract which is normally over a period of two to three years.
By the end of your PCP contract you have two options: You can return the car or you can pay an amount equal to the MFGV and thereby receive ownership of the car. Monthly payments tend to be lower but there are associated charges. A maintenance warranty may be required to keep the car close to itfs original quality. Another condition is that you sign up for comprehensive insurance. Also, there is a corresponding charge to any amount of mileage in exceeding the agreed limit for the period you use the car.
Refinancing Car Loans
Just as you may opt to refinance the mortgage on your home, you can also refinance your car by switching to a different loan company. When refinancing your car loan, you need to first settle your current car loan with an amount lent to you by a lender with a lower APR. This can result in significantly lower monthly payments so you can pay off your loan sooner and save on overall cost.

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