Car finance in the UK is on the rise and in 2021 around 90% of new or used cars are finance or leased. With statistics being so high, there are still a lot of misconceptions and car finance myth which may put people off apply. Alternatively, if you have finance you may only be aware of one type of traditional finance. Refused Car Finance, a bad credit car finance specialist broker, is helping to make car finance accessible for more people to get accepted for car finance. They also work to educate people on their credit scores and what having bad credit means for your chances of getting approved. There are many myths surrounding car finance and how you get approved so let’s take a look at the top 5 car finance myths.
1. Guaranteed Car Finance
There are a few car finance companies who offer guaranteed car finance but this is misleading and goes against advertising standards. Companies who offer this usually have extremely high APR rates and can result in financial difficulty. Car finance can never be guaranteed and if you’ve had trouble in the past getting accepted for finance then you may think this is the only way forward. However, there are plenty of options if you have been refused car finance already. Most finance deals will require a credit and affordability check to get you approved.
2. The Credit Blacklist
Many finance customers say, ‘I can’t get finance because I’ve been backlisted’. There isn’t actually such a thing as a blacklist. People with bad credit who have trouble paying back their loans in the past, have CCJs, IVAs or entered into bankruptcy may think they have been backlisted but this is not true. There is no such list that stops people from getting approved for finance. There are a few individual circumstances which can mean that you can’t get finance such as being declared bankrupt. During bankruptcy, lenders are legally prohibited from lending to anyone who have been declared bankrupt in the past 12 months. Also, if you have entered into an Individual Voluntary Arrangement, you may need to get approval from your IVA supervisor to show your car finance lender that entering into a new finance agreement will not put you at further risk.
3. Only People With Good Credit Can Get Financing
Car finance with bad credit has become more accessible for many people over the past 10 years. It used to be an unwritten rule that only people with good credit scores can get approved for finance. However, this is not the case. There are many options for car finance with bad credit. It is advisable that you try to increase your credit score before applying for car finance. Having a better credit score can mean that you benefit from lower Annual Percentage Rates, meaning you will pay less interest overall. Bad credit car finance specialists help people with bad credit get an affordable deal that’s right for their circumstances from a range of reputable lenders.
4. You Have to get financing With a Dealership
Traditionally, you would see the car you want from a dealership and then apply for finance on it. But what if you got your finance first? Using a car finance broker is a great way to get your finance. A car finance broker is essentially the middleman between you and the lender. They take a look at your application and perform a soft search check on your credit score and then send you to the most suitable lenders for possible approval. Lenders then come back to the car finance broker with the best deal for the customer. Your car finance broker does all the leg work for you then when you’re happy with your finance deal offered you can take it to any dealership across the UK which is verified by the Financial Conduct Authority.
5. Lower Monthly Payments are Best
Car Finance is a great way to spread the cost of owning your next car into affordable monthly payments. Choosing the loan with the lowest mostly payments may seem like the right choice for you, but you could end up paying more than you should. If you need a car quickly or are strapped for cash, then you can get a great deal with low monthly payments. But you should consider paying the maximum than you can realistically afford. Car finance deals tend to last between 1-3 years but Hire Purchase car finance deals can be spread over up to 5 years. Spreading the cost may be attractive as it means lower monthly payments. However, in the long run you will pay more interest overall.
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