Car finance is a great way to help make owning a car more affordable. For many drivers, car finance opens up more opportunities to owning a car and getting a better car than you would with cash. Through car finance deals, you can spread the cost of your chosen vehicle into affordable monthly payments with added interest. But many consumers aren’t aware of the ways in which car finance can be costing more than it needs to. Before you start applying for the best car finance deal, there are a few factors you can consider helping reduce your monthly payments and make your deal more manageable. Let’s take a look at the best ways to recue car finance costs.
Improve your credit score
Many car finance lenders will require you to pass a credit check before they accept you for finance. This is due to the risk that lenders take when they lend out money to consumers. You may have a bad credit score due to missed payments in the past and this can put potential lenders off as they think you won’t pay back your finance. Lenders usually reserve their best deals for people with excellent credit scores so it can be worth increasing your score in the run up to your finance application. You can do this by fixing any mistakes on your credit file, making all your payments on time and in full and reducing any existing debt you may currently have.
Apply with someone else
You could also consider reducing your car finance payments by splitting them with someone else. This is known as a joint finance application and is when two people, usually a couple, apply for finance on the same vehicle. Both of your personal details are used to support the application to help get you approved and then both parties are responsible for meeting the monthly repayment. Joint car finance applications can be good if you are struggling to get approved with bad credit or low income, your partners details are then used to help secure the deal if they have better credit or a higher income.
Increase your deposit contribution
When you apply for car finance, you may need to have a deposit to hand to secure the deal. Some car finance agreements require you to have a deposit so it’s worth thinking about before you start applying. Having a down payment for car finance can also help to reduce your monthly payments. This is because you don’t have to borrow as much from the lender and the loan amount is smaller overall. You may also receive a lower interest rate offered which can help to reduce how much you pay in the long run.
Choose a cheaper loan
Opting for a smaller loan or cheaper car can help to make your finance deal more affordable. Having a smaller loan to pay back can reduce your monthly payments and can mean you pay it off quicker. It can be tempting to take the longest loan term with the lowest monthly payment, but you can end up paying more back in interest. You should try to choose the shortest loan term possible with monthly payments that you can afford to make sure you’re not paying more than you need to.
Refinance your current car loan
If you already have a car on finance and want to help reduce the costs, you could consider refinancing your current car loan. Refinancing is when you replace your current car loan with another loan that has better terms and can help to reduce your interest rate and monthly repayments. If you want to refinance car payments, you will first need to consider a few factors. You can refinance at any time, but it is recommended that you refinance once you are halfway through your current agreement. This can be beneficial as you may have had time to increase your credit score and wait for interest rates to drop.
