Everyone seems to offer cheap new or used car loans quotes these days, your car dealer, your bank, your supermarket! We're bombarded by offers in the post and emails in our mailbox, sometimes it seems there's hoards of lenders out there, just desperate to give us money. So how can we possibly choose the right loan provider for our needs?
First of all, sit down and think about your circumstances, make sure you have a realistic monthly budget. Ensure your budget is livable even if your circumstances change, if you have children for instance, or find you home needs major renovations. Decide your budget and that you're going to stick to it before you even think about approaching lenders. It's very easy to get sucked into the "for an extra £50 a month..." trap, by knowing your financial limits before you start, you can be prepared to say no, even if it means you can't have your dream car.
You may find it beneficial to arrange a financial review with your bank or building society, who can help you to plan a realistic monthly budget, bear in mind they will take the opportunity to try and sell you their own car loan packages.
You should also be aware that your previous credit history will affect the options open to you, whilst those with a near perfect credit score will have their pick of the best rates, a poor credit score will usually mean a higher interest rate.
If you have a very poor credit history, you should consider whether it is viable for you to take out further credit, you may have to pay way over the odds in interest, or be stuck with less reputable lenders.
Those with no credit history at all, may also find sourcing a cheap car loan more difficult.
There are two main types of car loan, secured and unsecured, knowing which is right for you can help to cut out a plethora of potential lenders who don't offer what you need.
Secured loans use the vehicle, or your home, as security; if for any reason you stop making repayments on the loan the lender can repossess the car and recuperate their costs. Because the lenders can be reasonably assured they won't loose money by offering you the loan they can generally afford to offer a lower rate of interest.
Unsecured loans don't use security, so the lender doesn't have any protection if you stop making repayments. Because they are potentially taking more of a risk the interest rates on unsecured loans are higher. Unsecured loans are also, generally, unavailable to those with a poor credit history.
When considering which car loan companies to approach, it's worth considering how much you know about them. There are so many companies out there that it can be overwhelming, but stop and consider how many of them you have heard of. A car loan is a major financial investment, do you really want to take a risk on a company just because they put a leaflet through your door? When considering potential lenders ensure they have valid contact information and make sure they have a sensible complaints procedure, should any issues arise.
The next pages will take you through more specifics on finding and choosing a reliable cheap car loan provider, and getting a cheap used car loan quote.