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Most common car finance myths

When it comes to car finance there are many myths that can put people off applying. However, these myths are usually years old and may have had some truth in the past but is outdated now. Read the most common finance myths and the true answers below.

You can only get car finance from a dealership

You can get a good finance deal at your local car dealership but there are also many other avenues you can take. You could consider a personal loan which is usually supplied by a bank or building society. There are also many online car finance brokers who match you with the most suitable lender from a large panel. With your finance sorted, you can then walk into a dealership just like a cash buyer and get the car you want within your budget!

You can't get finance with bad credit

This myth is still commonly known and whilst it can be harder to get accepted for finance, there are many bad credit car finance specialist companies available to help. You could consider improving your credit score for a few months before you apply as this can increase your chances of getting approved. Many car finance companies also take you affordability and income into account to get you approved, as long as you can prove your earnings, why should you credit score hold you back?

Car finance ruins your credit score

Many people believe that any form of credit or finance is bad for your credit score. You will only get a negative credit score from finance if you repeatedly make late repayments or miss them all together. In fact, if you pay your finance back on time and in full each month, it can help your credit score increase as you have solid evidence of meeting your repayment schedule each month.

Shopping around for the best deal gives you bad credit

It’s important that you shop around to get the best deal for you and make sure your deal is secure. If you apply to multiple online car finance providers, make sure you stick to soft search applications only. When you submit a car finance application, a lending will usually run a credit check on your file. A hard search credit is recorded on your credit file and multiple hard searches on your file in a short space of time can negatively decrease your credit score. A potential ending will usually tell you if they are going to run a credit check on your file upon application and whether it will affect your credit score or not.

You must have a deposit

Many car finance agreements require a 10% deposit contribution and if you want a good car, a deposit of this size can be substantial. A deposit can help your chances of getting approved as it indicates to lenders that you will be trusted to pay back your loan. However, there are also many no deposit car finance options available.

You can’t pay off your agreement earlier than agreed

No lender can refuse you paying of the outstanding balance of your loan early. However, if you choose to do so, you may need to pay additional charges and can be penalised. If you would be interested in paying off your loan early, make sure you read the terms and conditions of your loan before you sign the contract.

You can only finance a new car

Finance was first made available on new cars in the UK. However, many dealerships now allow you to finance used cars too. There are some restrictions with certain types of finance agreements such as the age of the car at the end of the finance deal, you can find this out in your car finance agreement or ask at the dealership. Car finance has always been favoured as it allows you to get a newer car and pay for it in affordable monthly instalments. 
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