Car finance and loans advice

How do I get a competitive deal?

Register with Used Car Expert, or use our 'Car Loans' section and we'll tell you what we know about where to go for the best deals.

What kind of loan do I need?

When buying a used car, there are three main options:

• Personal unsecured loan
• Dealer finance / hire purchase agreements
• Secured / hire purchase agreements from a finance house

What is APR?

The APR is the average interest rate built up over the whole term of the loan. It takes into account the interest plus any insurance and fees. You may have a fee if you choose to repay your loan early which won't be included in the APR. If you are offered a loan by anyone, before you let them run a credit check on you, ask what the APR is. The better your credit score, the lower the APR should be.If you are offered a very high APR, don't even apply for the loan.

What is credit scoring / my credit report?

When you apply for a loan, the lender will look to build a credit score around your application to decide whether or not you are a reliable borrower. They will examine your current and past credit commitments and how well you have met them before deciding whether to give you the money. Get a Free Experian Credit Report here.

What is the difference between a loan and a hire purchase agreement?

If you purchase the car through a dealership they will often offer you a monthly repayment plan, called a Hire Purchase Agreement. You pay in installments, but you only own the car once the final installment has been paid. With a loan, you take on the debt yourself. Unsecured loans only go as high as £20,000. If you are going to buy a more expensive car, a secured loan may be your only option.

What happens if I can't repay the loan due to illness?

Payment Protection Insurance will pay your debts should you have a sudden loss of income due to illness or disability. All policies differ so it is important to read the terms and conditions carefully. The terms of the insurance will usually specify how long they are willing to pay the debts for and also and if they will not pay 100 per cent of the debt then the percentage they will pay. PPI can be expensive and you don't have to buy PPI through your loan provider so if you shop around you could find a better value deal.

I've been turned down for a loan - what should I do?

If you have been turned down for a loan the most important thing to do is to resist the temptation to go out straight away and apply for half a dozen extra loans. This will show up on your credit report and it could make you look desperate to potential lenders. Instead get a credit report to find out what the problem is. Get a Free Experian Credit Report here.

What can I do if the information on my credit report isn't accurate? Inform the credit scoring agency, providing paperwork that proves your case and they will update your file.

How long should I take a loan out for?

There are two factors to help you decide this:

1. How long will keep the car and what will it be worth when you sell? Ideally, you want the car to be worth more than the loan at all times (so put some savings in too) and ideally, the loan term will be shorter than the time you own the car. Then you won't have a loan still to pay after selling the car.
2. What length of loan will give you the best deal? Shop around as you may find if you take on the loan for a long period that your monthly repayments will be small but you will ultimately end up paying more. You need to find a happy medium for yourself.

What should I do if the car is faulty?

If you have an unsecured loan then it's not related.

If you have a Hire Purchase agreement report the fault to the dealer and get them to rectify the fault. Meanwhile keep paying the installments, otherwise you'll default on the credit agreement and the car may be repossessed.

How can I cancel a credit agreement?

There will normally be a cooling off period of a couple of weeks in which you will have the opportunity to think about the conditions of the loan. You lose this right if you sign the documents on the dealer's premises however. The agreement can also be legally terminated at any time, if you are not the owner of the car until the last payment is made (as is the case with Conditional Sale and Hire Purchase agreements).

Provided you have paid half the credit price of the car, you can simply hand it back. However, you will lose all the payments you have made to date, and will be liable for further charges if the condition of the car is poor. If you haven't paid half of the credit price of the car, you will lose the car and still be liable for any outstanding payments.

If I settle early will there be any consequences?

One of the most important hidden charges with any loan is the early redemption penalty. It means you will pay a fee if you decide to pay off a loan or mortgage early, or to move your borrowing to a different product or provider. The majority of providers will charge such a fee.