Can can finance affect your credit score?

Car finance can affect your credit score in a positive way if you make your repayments on time. However, if you miss a payment, your credit score and future borrowing power will decrease greatly.

What if I'm refused car finance?

If you're refused car finance, it can be easy to panic. The first thing you should do is try to identify why you were refused. It could be something as simple as adding an incorrect detail on the form. The most likely reason is you have bad credit, and the lenders you are applying with don't work with people with a poor credit history.

May 5, 2022

Car Finance Frequently Asked Questions

Car finance can be confusing, so that's why we've answered 10 of the most frequently asked questions.

If you're thinking about taking out a car finance deal and don't really know where to start, or you've had a deal in the past but are still a little confused, then you've come to the right place.

With so much information to be found on the internet, as well as from dealers or finance lenders themselves, it's easy to get bogged down in all of the jargon and what is best for you.

In fact, it's understood that 80% of people who currently have a car on finance don't actually know whether or not they have a good deal.

Do you have a car on finance but aren't sure if your deal is a good one? Sign up to Car Credible today for your free deal appraisal.

At Car Credible, we aim to help make car finance simple and better for everyone. We do this by breaking down your car finance deal to help you understand exactly what it is you're paying and offering advice on when we could get you into a better deal.

Once in a position to do so, we can get you out of your current car and into something newer, as well as potentially save you money on your monthly repayments and APR.

What is car finance?

If you wish to purchase a new - or used - car, then you will have the option of taking out a finance deal. This can be done both at a car dealership or online.

Car finance is an agreement between you and a credit lender, who, after conducting a series of credit and financial checks on you, will decide if you are eligible to borrow a lump sum of money to pay for the car.

What types of car finance is available?

There are four main types of car finance available:

PCP and HP are the more common ones and differ slightly. With a PCP you have the option to return or exchange the car at the end of the agreement, while with an HP you make all the monthly repayments until it's paid off and you own the car.

Who can take out car finance?

Anybody with a full driver's license can apply but not everyone will necessarily be approved. There are many factors including credit history, employment status, income, and other financial matters that could be the deciding factor in whether you're approved or not.

How can you apply for car finance?

Alongside our finance partners, you can apply for car finance online in a matter of seconds by getting a free, no-obligation quote. This can be done whether you already have a car on finance or you want to get car finance for the first time.

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Can you get car finance with bad credit?

Although having bad credit can be more difficult, it is still possible.

It's worth noting that if you are rejected by one lender, it is a risk to reapply with another, as credit applications do appear on your credit history, so it could worsen your chance if you attempt too many in quick succession.

Do you need to pay a deposit for car finance?

You don't have to put down a deposit if you do not want to on most car finance agreements. If you do put one down, it will reduce the amount you have to repay, but some people may choose to take out a 100% finance loan.

What type of car can I get with car finance?

If there is a car you have in mind then providing that you meet all the application checks and can afford the repayments, you should be able to get whatever it is you want.

It's worth being rational with your decision making though. You might have always wanted a fancy Range Rover, but if your budget only allows a Ford Fiesta, for example, you might want to reconsider your choices.

What is APR?

The annual percentage rate is the interest rate applied to any loan. It is the amount that you are charged for borrowing on top of the amount you've applied to borrow.

The longer the term of the deal, the more interest you will pay over time.

Are you eligible to get out of your current car finance deal early and switch to a new car? Find out with Car Credible today.

How long can car finance last?

Generally, you are able to take car finance out for any length of time between 12-60 months, whatever suits your needs and budget.

What is the difference between a soft and hard credit check?

A soft credit check is what a lender will do to get an understanding of whether your loan application will be successful.

They will be looking to see if you are up-to-date with any other repayment plans or if you are in any sort of debt or unable to pay back particular loans.

A soft credit check will not affect your credit score as only you will be able to see on your credit report that one has been done by a lender, so no other lenders will be able to see that you've had one undertaken.

A hard credit check is what a lender will do when they want to find out more granular information about your financial credit history and credit score.

This will show up on your credit report and can be seen by other lenders who will be aware if/when you have previously applied for a loan.