Car loans

Personal car loans usually last between one and seven years. However, loan terms can vary among lenders.

Short-term loans are typically for smaller amounts that can be paid back within 12 months. Long-term loans tend to be for larger amounts and can be paid back over 10 to 15 years or more.

In most cases, you can choose how long you’d like to take to repay the loan. Just remember, the longer the loan term, the more interest you’ll pay overall.

Interest rates tend to follow the Bank of England base rate, so a good rate will depend on what’s on offer in the current economic climate.

Typically, the higher your credit score, the better APR you’ll get. You may also find that larger loans offer lower rates than small loans.

An unsecured personal loan can be a good option if you’re looking to borrow less than £25,000.  As the loan is unsecured, you won’t need to put up a valuable asset as collateral. However, you’ll need a good credit score to get the best car loan rates.

Some car loans are secured. You can typically borrow more at a lower interest rate than an unsecured loan. However, you may be required to put up your car as security. This means that if you fail to keep up with the repayments, the lender could repossess your car.

Interest rates are constantly changing, so it’s hard to pinpoint which lender currently offers the lowest car loan rates. The rate you’ll be offered also depends on your financial situation and personal credit score.

That’s why it’s a good idea to shop around and compare car loan deals. When you compare our best car loan rates, you can check your eligibility without impacting your credit score. You’ll be able to see which eligible lenders are offering the lowest car loan rates.

A personal loan could cost less overall than a finance plan, but this will depend on your personal circumstances, particularly your credit score.

The better your credit score, the lower the interest rates you’ll likely be offered on a loan, keeping the overall cost of credit lower. However, if you have a poor credit score, you might get a better rate from a car finance deal. That’s why it’s important to weigh up the pros and cons of each, as well as comparing deals with us.

Here are some ways to lower your loan repayments:

• Borrow less – if you’re worried about not being able to keep up with your repayments, consider buying a cheaper car and borrowing less to pay for it.
• Look for the lowest interest rate – comparing loans to find a lower interest rate can help you save big. Just watch out for extra fees.
• Shop around – with Compare the Market, you can compare dozens of loans, allowing you to sort by the cheapest results.

To get an idea of your monthly repayments, use our loan calculator.

Personal loan agreements are usually covered by the Consumer Credit Act, giving you the right to pay off a loan early. This will save you paying interest for the full term, but there are usually early repayment charges.

Check the terms and conditions before taking out any loan, especially if you think you might be in a position to pay it off early. If you’ve already taken out the loan, contact your lender and ask how much it will cost to settle early.

If you’re in the middle of a car finance agreement, you might consider refinancing to a lower interest deal. Or if you’re at the end of a PCP (personal contract purchase), you may want to borrow more to make your final balloon payment.

One way to refinance your car is to switch to a car loan. To do this you’ll need the settlement figure to find out how much you should borrow. You may also need to add the cost of an early repayment fee if you’re leaving in the middle of your finance agreement.

If you’re approved for a car loan, you can use the money to pay the outstanding balance on your car.

At this point, you’ll own the car outright and the finance company will no longer be involved. It’s now your responsibility to pay back the car loan to your new lender in monthly instalments over a fixed period.

If you’re using a personal loan to buy a car and later discover an issue with the vehicle, it’s unlikely your lender will help.

Since you can use a personal loan for anything, it has nothing to do with the lender. So even if the car is faulty, you’ll still need to keep up your repayments.

If you want to make sure you’re protected, look for a car warranty from a dealer.

Here’s how to increase your chances of being accepted for a personal car loan:

• Check your credit score – you can check your credit score with a credit reference agency like Experian, Equifax or TransUnion.
• Use our loan eligibility checker – you’ll be able to see the sorts of interest rates you can expect to be offered.
• Reduce your monthly outgoings if possible – the less you’re spending on other expenses, the greater your affordability (that is, your ability to afford repayments) will be. Think about whether you have any unused memberships or subscriptions that you could cancel, for example.
• Borrow less – if you’re asking to borrow less, lenders will see you as less of a risk. That means they may be more willing to accept your loan application.
• Consider a secured loan – if borrowing less isn’t an option for you, you could look at a secured loan. This secures the loan against an asset you own, such as the car itself, giving you access to larger amounts. But, remember that if you can’t keep up with your repayments on a secured loan, your lender could repossess the asset you secured it against.