When it comes to financing your car in the UK, it can feel like you’re trying to navigate a minefield – especially if you’re not a financial wizard. But don’t worry, we’re here to help you make sense of it all. Let’s explore the differences between the most popular car finance options available to you, and which one we believe is the smart choice for UK car buyers.
Personal Loans
A personal loan is a type of unsecured loan that can be used for a variety of purposes, including financing a car. With a personal loan, you borrow a fixed amount of money and repay it over a set period of time, typically between 1 and 5 years. Personal loans can be a good option for those with good credit, as they typically have lower interest rates than other types of car finance.
However, personal loans can also be risky for those with bad credit or limited income. If you’re not able to repay the loan on time, you could end up defaulting on the loan and damaging your credit score. Additionally, personal loans don’t offer the same level of protection as other types of car finance, such as hire purchase agreements.
Hire Purchase Agreements
A hire purchase agreement is a type of car finance that allows you to “hire” a car for a set period of time, typically between 2 and 5 years. With a hire purchase agreement, you make regular payments towards the car, and at the end of the agreement, you have the option to purchase the car outright.
Hire purchase agreements can be a good option for those with bad credit, as they typically require a smaller deposit and offer lower interest rates than personal loans. However, they also come with certain drawbacks. For example, if you miss a payment, you could be at risk of having the car repossessed. Additionally, hire purchase agreements can be more expensive in the long run than other type of car finance, such as personal contract purchase agreements.
Personal Contract Purchase (PCP) Agreements
A PCP Agreement is a type of car finance that allows you to “rent” a car for a set period of time, e.g. between 2 and 4 years. With a PCP Agreement, you make regular payments towards the car, and at the end of the agreement, you have the option to purchase the car outright.
This type of finance can be a good option for those with good credit, as they typically require a smaller deposit and offer lower interest rates than hire purchase agreements. However, they also come with certain drawbacks. For example, if you miss a payment, you could be at risk of having the car repossessed. What’s more, PCP Agreements can be more expensive in the long run than other types of car finance, such as car loans from credit unions.
Car Loan from a Credit Union
A car loan from a credit union is a popular way to finance a car. Because credit unions are not-for-profits and give their members preferential rates, they’re often the most affordable options in the market. For example, you can pick up a 5.9% APR Car Loan from EuroTrust Credit Access when you borrow between £10,000 and £35,000. Additionally, no early repayment fees, no admin charges, and free loan insurance (T&Cs apply), give you peace of mind
So there you have it, folks. The different car finance options available to you laid out as simply as we can. And in our humble opinion, a car loan from EuroTrust Credit Access is the way to go. After all, our job is to support our members and help them make smart financial choices. So, if we let you go elsewhere and pay significantly more for your car finance, without hearing about our great rates, then we’d feel guilty that we kept that secret to ourselves.
