Car finance can be a great way to spread the cost of a vehicle, but high monthly payments can put a strain on your budget. Whether you’re applying for finance or already have a loan in place, there are ways to reduce your payments and make car ownership more affordable.
In this guide, we’ll explore five practical strategies to lower your car finance costs—helping you find a deal that works for your budget.
1. Choose a Longer Loan Term
One of the most effective ways to lower your monthly repayments is to spread the loan over a longer period. By increasing the repayment term, you reduce the amount due each month, making car finance more manageable.
However, there is a trade-off. The longer the loan term, the more interest you’ll pay overall.
Although the monthly payments are lower, you’ll pay more interest over time. If you choose this route, check whether your lender allows early repayments without penalties, so you have the option to pay off the loan sooner if your financial situation improves.
2. Improve Your Credit Score Before Applying
If you’re in the early stages of applying for car finance, improving your credit score could help secure a lower interest rate, which in turn reduces your monthly payments.
How to Improve Your Credit Score:
Pay all bills on time – Late payments can lower your score.
Reduce credit utilisation – Aim to use less than 30% of your available credit.
Avoid multiple hard searches – Too many applications in a short time can impact your score.
Check your credit report for errors – Mistakes can lower your score unfairly, so correct any inaccuracies.
A better credit score gives you access to lower APR rates, meaning you borrow at a cheaper rate and pay less each month.
A bigger deposit reduces the amount you need to borrow, which means lower monthly payments.
If you don’t have savings available, you may still be eligible for no-deposit car finance, but this often results in higher monthly payments.
4. Choose a More Affordable Car
The car you choose has a direct impact on your finance repayments. A lower-cost vehicle means a smaller loan, which naturally reduces your monthly payments.
How to Reduce Your Finance Costs:
Consider a nearly new or used car – These are often much cheaper than brand-new models.
Look for economical vehicles – Some cars hold their value better and have lower running costs.
Compare similar models – A slightly different trim level or engine size can make a significant difference in price.
5. Review Running Costs Before Committing
The cost of car finance isn’t just about the loan repayments – it’s also about how much the car costs to run each month.
Key Running Costs to Consider:
Insurance premiums – Some cars cost significantly more to insure than others.
Fuel efficiency – A more fuel-efficient car can save you hundreds of pounds a year.
Road tax – Some cars qualify for lower road tax rates or exemptions.
Maintenance and servicing – Look at the reliability of the model you’re considering.
By choosing a car that is cheaper to insure, fuel, and maintain, you can make overall ownership more affordable – even if the finance deal itself stays the same.
Final Summary: 5 Ways to Reduce Car Finance Payments
Choose a longer loan term to lower monthly costs (but pay more interest overall).
Improve your credit score to access lower APR rates.
Make a larger deposit to reduce the amount borrowed.
Choose a more affordable car to cut your monthly repayments.
Review running costs before committing to avoid unexpected expenses.
If you’re looking for car finance that fits your budget, it’s important to compare your options.
Navigating car finance can be challenging, especially if you’re currently in an Individual Voluntary Arrangement (IVA). Many people assume that being in an IVA automatically disqualifies them from obtaining car finance, but the reality is more nuanced. We’ll explore your rights regarding car finance during an IVA and offer practical advice to help increase your chances of approval.
What Is an IVA and How Does It Affect Your Finances?
An IVA, or Individual Voluntary Arrangement, is a legally binding agreement between you and your creditors to pay off your debts over a fixed period, typically five to six years. It’s a popular solution for those struggling with unmanageable debt, as it allows you to make affordable monthly payments based on your financial situation. However, being in an IVA does impact your credit score, making it harder to access credit, including car finance.
When you’re in an IVA, your finances are closely monitored by an insolvency practitioner (IP). This professional is responsible for managing your IVA, ensuring that you stick to the agreed payment plan, and that any new financial commitments are affordable. While an IVA does restrict your access to credit, it doesn’t completely close the door on obtaining car finance.
Can You Legally Apply for Car Finance During an IVA?
The short answer is yes, you can legally apply for car finance while in an IVA. However, there are conditions you must meet. The most crucial step is obtaining approval from your insolvency practitioner (IP) before you apply. Your IP needs to confirm that the new finance agreement is affordable and will not jeopardize your ability to make your IVA payments.
Legally, nothing prevents you from seeking car finance during an IVA, but it’s essential to proceed with caution. The new finance agreement must be sustainable within your current budget. If your IP approves and the lender is willing, you can proceed with your application.
Your Rights When Seeking Car Finance in an IVA
It’s important to understand that you have rights when applying for car finance during an IVA. Knowing these rights can empower you to make informed decisions and protect yourself from unfair practices.
Right to Apply – You have the right to apply for car finance, provided you can afford the repayments and have obtained approval from your IP.
Right to Transparent Terms – Any lender you approach must provide clear and transparent terms. You should fully understand the interest rates, fees, and repayment schedule before signing any agreement.
Right to Protection – As a consumer, you are protected from unfair or predatory lending practices. This means that lenders cannot take advantage of your financial situation by offering unfavourable or exploitative terms.
Right to Informed Consent – You have the right to be fully informed about how taking out car finance might impact your IVA and overall financial health. Your IP should provide guidance on this.
How to Increase Your Chances of Approval
Getting car finance during an IVA can be challenging, but it’s not impossible. Here are some practical tips to help you increase your chances of approval.
Choose the Right Lender – Not all lenders are willing to work with individuals in an IVA. Focus on lenders who specialize in bad credit or IVA car finance. They are more likely to understand your situation and offer suitable terms.
Demonstrate Financial Responsibility – Lenders will want to see that you’re managing your finances responsibly. This means keeping up with your IVA payments, maintaining a budget, and avoiding any new debts.
Consider a Co-Signer – If possible, having a co-signer with a stronger credit history can improve your chances of approval. This person agrees to take responsibility for the loan if you’re unable to make payments.
Prepare Your Documentation – Before applying, gather all necessary documents, including the approval letter from your IP. This shows the lender that your application is serious and that your IP has approved the finance.
How Motorly Can Help You Navigate IVA Car Finance
At Motorly, we understand the challenges of securing car finance during an IVA. That’s why we’ve partnered with a large panel of lenders who specialize in IVA car finance. Our team is experienced in finding finance solutions tailored to your needs, even if you’re currently in an IVA. We’ll guide you through the process, from obtaining the necessary approvals to finding the right car finance deal.
Getting car finance during an IVA may seem daunting, but with the right approach and understanding of your rights, it’s entirely possible. By working with specialized lenders and maintaining open communication with your insolvency practitioner, you can secure the car finance you need without jeopardizing your financial recovery. If you’re ready to explore your options, contact Motorly today. Our team is here to help you every step of the way.
Are you ready to drive away in your dream car? If the answer is yes, then securing the right car finance deal is a crucial step. But before you start your search for the perfect car, there are some things you can do to increase your chances of being approved for finance in 2023. In this blog, we’ll share our expert tips on how to prepare for a car loan and improve your chances of getting the car you want. So, buckle up and let’s get started!
Having A Deposit Can Seriously Boost Your Chances
One of the first things you should consider is saving for a deposit. Although no deposit options are available, a larger deposit will reduce the amount you need to borrow. By borrowing less, you’ll decrease the size of your car loan and potentially reduce your monthly payments or shorten your loan term.
Additionally, having a larger deposit can increase your chances of getting approved because the more you borrow, the riskier you may appear to the lender.
Understand Your Credit Score
Another important factor to consider is your credit score. When applying for Car Finance, lenders will take your credit score into account. It’s essential to know your credit score and where you stand, so you can make informed decisions about your finances.
If your credit score is lower than you hoped, don’t panic! There are several steps you can take to improve your credit score, including registering for the electoral roll, paying your bills on time, checking for mistakes on your credit report, and reducing credit card utilization.
Don’t Get Carried Away With Your Budget
Next, it’s important to research the type of car you want and create a wish list of features you require. This will help you stay focused on the type of car you need and prevent you from overspending. It’s also crucial to consider your future needs, such as starting a family, when selecting a vehicle.
Selling Your Old Car Help Help Finance Your New Set Of Wheels
If you have an old car to sell or part-exchange, it can help to get your finance approved. The value of your old car can be used as a deposit in the new car loan deal, reducing your borrowing amount. It’s recommended to use an online valuation service to get an idea of how much your old car is worth, but keep in mind that the final value may be different depending on factors such as the condition of the vehicle.
Don’t Overstretch Yourself
Finally, deciding on a budget is crucial. Knowing how much you can afford to pay without overstretching yourself will ensure you don’t start looking at cars you can’t afford. It’s important to remember that car ownership costs aren’t just the cost of the vehicle itself. You also need to factor in annual MOT, tax, fuel, and maintenance costs.
By saving for a deposit, checking your credit score, researching the type of car you want, valuing your old car, and deciding on a budget, you can increase your chances of getting approved for the car finance you need. So what are you waiting for? Apply for Car Finance today and see how much you can borrow.
If you are looking to finance your next car you may be a little confused about some of the financial jargon used. One such term is APR. We’ll break down what it means and how it affects your next purchase.
What is APR?
APR is a key factor to think about when it comes to car financing. However, you might wonder what APR actually is. It’s the annual percentage rate, or APR, to put it simply—a gauge of borrowing costs. It includes any additional costs or fees associated with a loan, such as origination fees or closing costs, in addition to the interest rate on the loan.
The APR on a car loan can have a significant impact on the overall cost of the loan. A higher APR means that you will be paying more in interest over the life of the loan, which can add hundreds or even thousands of dollars to the total cost of the loan. On the other hand, a lower APR can result in significant savings, as you will be paying less in interest.
When looking for a car loan, it’s critical to compare the APRs provided by various lenders. This will assist you in finding the loan that offers the most favourable interest rates and costs, ultimately saving you money. To make sure you are getting the best deal possible, you should also take into account other aspects, such as the loan’s terms and overall cost.
What’s the difference between representative APR and exact APR
The representative APR is the APR that a lender must quote to at least 51% of successful applicants. It is intended to give consumers an idea of the interest rate they can expect to receive on a loan or credit card.
The exact APR that you are offered on a loan or credit card may be different from the representative APR, as it is based on your personal circumstances and credit profile. Lenders take into account a variety of factors when determining the exact APR for an individual, including their credit score, income, and debts. As a result, the exact APR that you are offered may be higher or lower than the representative APR.
It is important to keep in mind that the representative APR is just an estimate and is not guaranteed. The exact APR that you are offered may be different, depending on your personal circumstances and credit profile. It is always a good idea to shop around and compare offers from multiple lenders to find the loan or credit card that offers the best terms and lowest APR.
What affects the APR offered by lenders?
There are several factors that can affect the APR you are offered on a car loan. These include:
Your credit score: Lenders use your credit score to assess your creditworthiness and determine how likely you are to default on a loan. If you have a higher credit score, you may be offered a lower APR.
The type of loan: Different types of loans, such as fixed-rate loans and adjustable-rate loans, may have different APRs.
The length of the loan: The longer the loan term, the more interest you will pay over time. As a result, loans with longer terms may have higher APRs.
The size of the loan: Lenders may charge higher APRs on larger loans due to the increased risk associated with lending a larger amount of money.
For more tips on how to save money on your next Car Finance deal, check out our guide on how to get the Best Cheap Car Finance Deals with Motorly.
What is a credit score?
A credit score is a three-digit number that represents your creditworthiness. It is based on information from your credit report, which is a record of your credit activity. The higher your credit score, the more likely you are to be approved for credit and to qualify for favourable interest rates and terms.
How does your credit score affect your ability to obtain car finance?
Your credit score is one of the factors that lenders consider when deciding whether to approve you for a car loan. A good credit score can improve your chances of getting approved for a loan and may also help you get a better interest rate on the loan.
What steps can a user take to improve their credit score?
Here are some steps you can take to improve your credit score:
Pay your bills on time: Late or missed payments can have a negative impact on your credit score.
Keep your credit card balances low: High balances can indicate to lenders that you are overextended and may have difficulty repaying a loan.
Use credit responsibly: Don’t apply for too many new credit cards at once, and avoid using all of your available credit.
Check your credit report for errors: Errors on your credit report can lower your credit score. You can request a free copy of your credit report from each of the three major credit bureaus (Experian, TransUnion, and Equifax) once per year.
Consider a credit-builder loan: This type of loan is designed to help you build credit. You borrow a small amount of money and make regular payments to repay the loan. This can help you establish a positive credit history.
What are the benefits of improving your credit score?
Once you improve your credit score, you may be able to qualify for credit cards and loans with better interest rates and terms. This can save you money on interest and make it easier for you to afford the things you want or need, such as a car or a home.
It is still possible to get Car Finance with a bad credit rating?
It is possible to get car finance with a bad credit score, although the terms of the deal may be less favourable. Lenders who offer car loans to people with bad credit may charge higher interest rates to compensate for the increased risk. However, options are still available to you.
How to prepare for a car loan and improve the chances of getting your new car
Looking to buy a new car? If you are considering a car loan to finance your new car you may be unsure of what you can do before you apply to improve your chances of getting accepted.
Here are our top tips to help you get the car loan you need to finance your next vehicle.
Save for a deposit
Although No Deposit options are available, the bigger deposit you have the less you’ll have to borrow.
By having a bigger deposit you make by able to decrease the size of the car loans needed to finance your vehicle. It could reduce the monthly payments, or you could borrow the money over a shorter loan term.
By borrowing less, you will also increase the chance of you getting approved. This is because the more you borrow, the higher the perceived risk you are to the lender.
Keep an eye on your credit report
When applying for a car loan, it’s worth knowing exactly what your credit score is. Your credit score is taken into account when taking out car finance. Therefore it’s vital to know where you stand with yours. That way, you will be able to make an informed decision on what to do next.
Once you know what your credit score is you can take steps to improve
How to improve your credit score
If your credit score is lower than you hoped it would be don’t panic! The good news is once you know what your credit score is you can take steps to improve it. A few small changes to your credit profile can have a dramatic on your score, and in turn, your chances of getting approved for a car loan.
Steps you can take to enhance your credit score include:
Register for the electoral roll
Ensure all bills are paid on time
Check for mistakes on your credit report
Cut down on credit card utilisation
Research which cars that you want and create a car wish list
Once you have a better understanding of your finances you can start to focus on the type of car you would like.
It’s a good idea to create a list of features that you require and ideally put them in rank order. That way, you’ll have a better idea of which features you won’t compromise on and those you may do.
Make sure to also think about what your needs will be in a few yours. For example, if you are thinking of starting a family a two-seater sporty convertible may be fun now but impractical in the future.
If you are still unsure exactly what car you want don’t worry. Our Sales Managers can help you with your car search.
Work out how much your old vehicle is worth
If you have an old car to sell or part-exchange it can help get your finance approved. The value of the old car can be used as a deposit in the new car loan deal and reduce your borrowing amount. Using an online valuation service should give you a good idea of how much your old car is worth.
Don’t forget an online valuation is only a rough guide and the amount you get could be different due to many factors – including the condition of the vehicle.
Decide on a budget
Deciding on a suitable budget for your car purchase is an important step in your car-buying journey. Knowing how much you can afford to pay without overstretching yourself will ensure you don’t start looking at cars you can’t afford.
It’s worth remembering that car ownership costs aren’t just the cost of the vehicle itself. You also need to factor in the annual MOT, tax, fuel and maintenance.
Apply for a Car Loan today
Ready to take the next step? Apply today for Car Finance and see how much you can borrow.
Whether you’re already in an IVA or considering arranging one, you may be wondering how it could affect your car finance application. Our quick guide can help.
What is an IVA?
IVA stands for Individual Voluntary Agreement. It is a legally binding arrangement between you and your creditors to pay back your debts. This means it’s recognised by the court and your lenders have to adhere to it.
It’s meant for people who can manage to pay something towards their debts, but can’t keep up with the repayment amounts their creditors are demanding.
Can I get car finance with an IVA?
A common question our customers often ask is how being in an IVA might affect their chances of buying a car on finance.
An IVA does limit your choices somewhat, is it still possible to get Car Finance. An IVA will affect your credit score. But just because you have poor credit, doesn’t mean you don’t have options.
Whilst we can’t guarantee that we can help, our panel of lenders can assist those with a variety of credit histories – including those who are in an IVA.
How Does an IVA Work?
An IVA is set up and run by a qualified Insolvency Practitioner (IP). They will put together the repayment plan (including how much is paid each month, and for how long), and act as the go-between an individual and their creditors, to check they agree with the set monthly outlay.
As long as 75% of the creditors give the go-ahead to the IP’s proposal, the IVA will go ahead. Monthly repayments will then be given to the IP, who will split the funds between the creditors.
IVAs are available to those in England, Wales and Northern Ireland, but not in Scotland.
If you are interested in finding out more, fill out our simple, no-obligation form today to see how much you can borrow today.
When shopping around for the best Car Finance deals, it’s only natural to worry about what effect it might have on your credit score. Many customers like yourself often check if they can get car finance before they proceed, or have even found a car that they want to buy.
At Motorly, we make the process simple, by allowing you to check if you can get approved before you formally take out car finance. By conducting a ‘soft search’ credit check at the start of your application, you can see what your options are without negatively affecting your credit report.
What is a Soft Search?
A ‘soft search’ is a simple credit check that allows us to see your financial history without showing this information to potential lenders.
How does Soft Search Car Finance Work?
It’s easy to get a quick quote with Motorly. By completing the quick application form we’ll be able to give you an idea of your monthly payments what you can borrow, based on your current financial position.
The process only takes a couple of minutes and you will be given a decision straight away.
No impact on credit score
Because we only conduct a Soft Search, it will not impact your credit score, even if you decide to not proceed. It also won’t affect your future ability to get finance.
To help ease the financial impact of coronavirus, car finance payment holiday plans have been introduced. Three month car payment holidays are available. Find out if you are eligible and how to apply.
The Finance Conduct Authority (FCA) has put this in place for leasing, personal contract purchase (PCP) and hire purchase vehicles (HP). It’s not just restricted to cars, these options are also available on bike and van finance as well. So if you’d like to apply for a payment holiday on your vehicle, then we’ll help you find out how.
what to do
To apply for a three month payment holiday plan we recommend that you contact your finance provider directly and as soon as possible. If your finances have been affected by the coronavirus pandemic, then you should approach your lender and explain your situation.
Many lenders have specific areas of their website where you can put in a payment gap request. Otherwise, you can give them a call. Each lender website may give you a specific telephone number to contact. You may experience difficulty getting through on the phone due to increased demand, but do persevere, especially if an online request is unavailable.
Whilst many people’s ability to make payments has been impacted, if you can still make your payments then this would be ideal. However, do not hesitate to ask for help. Lenders are not currently able to repossess vehicles due to coronavirus related financial difficulty. It is important to know that your interest will still apply throughout the payment holiday.
Your lender should be able to help you in other ways, if the payment holiday isn’t right for you. The best course of action is to contact your lender and see how they can help you in a way that suits you.
For more information, take a look at this helpful article from Which?.
