UK Car Loans- A Detailed Introduction

by David Jenyns on June 24, 2011

At some point in our lives, there would come a time when we would be faced with a situation where we have to decide in securing a loan or paying in cash. And when the amount that we have to put up is really huge, the only viable option would be to apply for a loan especially if it involves a house or a car. Even people who have enough money to afford a full cash payment for cars and houses now find it more coherent to opt for a good deal in a UK car loan rather than paying the full amount in cash whereas they can use a great portion of what is supposed to be intended for a full cash payment as an investment to another business where it the funds would earn more and would even pay for the interest charges added to the monthly amortization of the car loan.

Options on car loans UK are provided by a number of financial groups nowadays including dealers, the credit union, brokers, and online loan companies. The reason why I mentioned the words “options on UK loans” is that car dealers are not the ones that really provide the loans themselves. They have partner banks and car loan financing companies and the moment that you come in, choose your car, and fill up the loan application form, they send that document to their different partners and request for their quotes – quotes which have already infused the dealer’s commission. The car dealers, on the receipt of the different quotes, present then to you as available repayment options. The lender who offered the car loan option that you choose will be the one to provide the car finance loan to you, thus, the dealer gets paid in full plus commission, and you pay the monthly amortizations to the lender. And that is the very reason why after applying for a car loan with a car dealer, you would notice a lot of hard inquiries on your credit report. A hard inquiry, referring to the pull up of your credit report, is reported to the credit bureaus each time a lender reviews your credit history by asking any of the credit reporting agencies to furnish them with your credit report. Watch out for this because multiple hard inquiries may hurt your credit rating.

The financial institutions and the banks will decide, based on your credit rating, the amount of car loan they are willing to provide, and you have to shoulder the rest.

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