What is the difference between a car loan and car finance?
There is some confusion over the difference between car loans and car finance in the UK.
Car finance will normally see you arranging the finance through a dealer who is selling you the car or arranging finance with a car finance company before going to one of their approved dealerships to select your car from their stock.
A car loan however is arranged in the same way as a personal loan - the lender gives you the funds directly to go and buy the car you want. This gives you the option to shop around and does not limit you in the same way that car finance might.
Car loans (like a personal loan) also give you the option to spend your money how you see fit – for example you may only want to spend 90% of the loan on a car and the rest on home improvements – a car loan gives you that flexibility.
Which is best for me?
If you are looking for a new car and are unsure which is the best method of finance you could consider the following:
- Cheap car loans offer more freedom when buying a car than car finance as you can buy your car privately or through a dealership.
- If you are a homeowner you could get a great rate on your car loan by taking a secured loan. If you are a tenant or you choose an unsecured loan the rates may be slightly higher but there are still cheap loans available.
- Typically a vehicle finance arrangement will be more expensive than a loan. If you are a tenant with bad credit you may feel this is the only way to obtain finance on a car when in reality you could still get a loan.
How do car loan rates differ?
As with any finance product the rates for car loans will vary depending on your credit rating and personal circumstances. You should be aware that unsecured loans for cars can carry slightly higher than average interest rates although there are cheap loans available.
Bad credit car loans.
Tenants – If you are a tenant with bad credit there are a number of specialist lenders who can offer you reasonably cheap car loans. A loan broker can help you to find a cheap tenant loan as an alternative to bad credit car finance.
Homeowners- if you are a homeowner with bad credit you have will still be eligible for a very good rate if you secure the loan against your property.
How do I find the best car loans?
As there are hundreds of loan plans on the market a quality loan broker can search specialist car loan plans for you in minutes to find you a loan that you will be accepted for. Try decisionloans.co.uk today.