There are many common misconceptions surrounding car finance and in this article we aim to debunk some of these potentially harmful myths.
Car Finance Myths Debunked!
A poor credit rating will result in a huge rate of interest
This is completely untrue. Even if you have a poor credit rating or have been refused credit before, there are still lots of lenders out there that may well lend to you at a decent rate. Interest rates are not solely reliant on the applicant’s credit rating; several other factors are included, such as the value and term of the agreement, the applicant’s earnings and employment status and their electoral role registration.
You need to find a car prior to applying for finance
This is a very common misconception and again, it is totally untrue. After all, it is hard to find your perfect car without knowing how much (if any) finance you are able to secure. The vast majority of lenders are able to provide their customers with a very good idea of how much finance they will be able to offer them. This kind of agreement is usually referred to as an ‘Approval in Principle’.
You have to take the finance deal offered by the dealer of the car you wish to purchase
Car dealers will be very keen for you to use their own finance deals because it means more profit for them. However, such finance packages are rarely able to offer competitive rates of borrowing. A buyer can source their finance from any company in order to buy a vehicle from any dealer. There are hundreds of car finance providers in the UK and it is well worth shopping around. Comparison websites can be very helpful here.
Securing finance is more complicated than getting a bank loan.
Applying for car finance couldn’t be simpler and can be done on the telephone or on the internet in a matter of just minutes. Most bank loans are far more involved.
Car finance usually involves lots of hidden fees and charges.
Some finance providers will charge an additional arrangement fee, but many do not. This is something well worth checking early on during the application process. There shouldn’t be any additional fees to pay. These days, the car finance sector is larger than ever, and it is also highly regulated.
The self-employed aren’t able to get favourable finance deals
Self-employed people are still able to get competitive rates for their finance, but they will need their business details and proof of income over the previous few years.
Bankrupt people are never able to secure car finance
This, again, is a falsehood. Many lenders will lend to those that have been declared bankrupt in the past, providing their financial situation has since improved. However, those that are currently classed as bankrupt will not be able to get finance.
In order to get finance you need a cash deposit or a part-exchange
This was the case until fairly recently, but many lenders these days will not require any deposit at all.
Once you have been refused finance you will always be rejected
Different lenders have different criteria so, should you be turned down, it is worth trying other providers until you are accepted.
