Spreading the cost of purchasing your car
In terms of affordable interest rates, a fixed sum car loan can be one of the most convenient choices open to you to buy a vehicle when you need an on the spot answer to a finance problem. Whether a fixed sum loan is the ideal form of finance for your individual requirement is up to you to ascertain.
The following details outline some of the basics of buying your vehicle with a fixed sum loan finance agreement. It also includes just how loans of this type work.
A fixed sum loan: what exactly is it?
If you’re currently considering the purchase of either a used or new car, you find yourself needing to borrow, and you wish to own the car outright by the end of the finance deal, a fixed sum finance deal is one of the options that might fit your necessary requirements.
You can enter into a hire purchase deal (HP), apply for a personal car loan or you can opt for a fixed sum car loan.
A fixed sum car loan delivers to you not only a fixed plan of repayments but also a fixed rate where interest is concerned. Just like a personal loan, from the beginning of your finance agreement, your chosen vehicle belongs to you however there are differences. Whereas with a personal loan you’re able to sell the vehicle at any time, with a fixed sum loan you may not part with your possession of the car before your finance term has ended and you have settled all repayments.
However, unlike a more traditional personal car loan, you benefit from support and protection from your lender should something unfortunately go wrong with the purchased vehicle within a time frame of the first six months after the sale. This is because the car itself has been written into your agreement for finance, nominated as an asset against the debt.
Like a personal loan, the smaller amounts borrowed in a fixed sum loan means the larger the interest rates and the bigger the total loan amount the lesser the interest paid.
Fixed sum loans can be a suitable selection if you’d like a fixed plan of repayments and you’d like your vehicle to be protected by being named as an asset in your agreement.
How a fixed sum loan works
Once you’ve found the particular vehicle you would like to purchase you’ll know precisely just how much you would like to borrow from the bank or finance company. This figure will be based on the car price you want to take yourself out a loan for with any deposit you might have at your disposal in savings subtracted from the total sum required.
On receiving your fixed sum car loan, you’ll own your vehicle right from the beginning of your loan. You’ll pay fixed repayment instalments usually over 12 to 60 months. Until you’ve completed your final payment you don’t have the right to either sell or part company with the vehicle. You also withhold the right, until the end of your finance agreement, to modify or alter the vehicle in any way shape or form.
You can take full advantage of our finance calculator online here at Car.co.uk, which will show you which loans are most likely for you to be accepted for. Simple to use, just enter how much you would like to borrow and over what length of term into the fields and click “get a quote” for a calculation and discover your eligibility.
Before signing a finance agreement with a dealer, it’s worth comparing fixed sum loan prices with your bank or a credit union, they may be able to offer you a superior deal.
Your finance deal is finished - what happens next?
When a finance agreement comes to an end, there are often conditional aspects to consider as well as additional charges. When you take out a HP (Hire Purchase agreement), for example, the vehicle doesn’t belong to you outright until you pay an administrative payment known as an “option to purchase fee” - this is normally a sum between £100 to £200 and should be stated clearly from the beginning of your Hire purchase finance agreement.
In PCPs (Personal Contract Plans), a balloon payment will be requested should you wish to claim ownership of the vehicle you’ve been making repayments for. You could also face the possibility of extra charges owed. This can be payable for damage caused to the car that’s taken to be more than normal wear and tear. You’ll also be subject to a charge for overstepping the quantity of miles you anticipated you’d be covering in the period of time stated in your finance agreement. These miles are usually payable at a rate of between seven and ten pence per exceeded mile and can every easily tot up an additional £100 to £200 if you exceed the limit outlined in your finance agreement.
Very similar to a personal loan, once your payments are complete the banks or lender of your fixed sum loan will, on your personal credit file, mark the total of the loan paid in full. The car will then no longer be collateral and fully yours to modify or change as you see fit or sell on should you decide to do so.