Are you engaged in arranging money to buy your dream car?
Are you looking for guaranteed car finance and getting rejected every time?
Whether you are saving up for your first car or you are seeking a replacement. But if you can secure car finance, then even a used car is a good option. Thus, car-financing schemes can be helpful in acquiring your dream car. Especially, the no deposit car finance. It lets you secure no payment upfront.
Let’s first understand car finance.
What is Car Financing?
Car finance allows individuals to use their dream car, paying nothing upfront. In addition, the individual can pay later in instalments. Credit history, credit score, income, and other factors determine the terms of a car loan. Personal Contract Purchase (PCP) and Hire Purchase (HP) are two types of car financing.
a) Hire Purchase
It involves paying 10% of the deposit upfront and repaying the balance interest over an agreed period. This arrangement is only for those who are looking to take car ownership after the contract ends.
b) PCP (Personal Contract Purchase)
In contrast to Hire Purchase, in PCP, the individual can use the car only after securing ownership of the car after paying the complete amount.
Under this, you can either return the car, pay the balloon payment, or switch to a new PCP arrangement altogether.
But the fact is, these arrangements require you to lay a hefty deposit.
What is No Deposit Car Finance?
When nothing works, no deposit on car finance is a good option. However, it may sound too good to be true, but individuals can leverage it based on their circumstances.
A no deposit car finance is when you don’t have to pay any fee upfront compared to car finance arrangements. Thus, if you want to buy a car but can’t afford the initial deposit, then it is a good option for you. One of the biggest benefits of zero deposit car finance is monthly deposits or repayments are lower than the hire purchase arrangement.
This is great. Apart from eliminating the need for any upfront payment, it guarantees lower payments. However, securing a no deposit car finance requires you to have good credit.
Lenders seek only those who can pay the amount as there is no money forthcoming before the initial monthly payment. And the finance period is likely to be longer in this case.
How Does a No-Deposit Car Finance Work?
When a creditor lends money, he conducts a soft credit check to make sure that the borrower will repay the loan on time. The creditors will be keen to see how a borrower manages loans and what the repayments look like.
Unlike a hard credit check, it won’t affect your credit report and score. Therefore, a soft credit check is an initial process conducted to approve the candidate. It determines that a creditor will lend the sum provided you meet the lending criteria and affordability checks.
After you have an agreement in credit with the creditor, a hard credit check will be conducted shortly after the soft check. You should be certain about the agreement before you proceed.
Go through the terms and conditions as failing in this can hurt your credit score. Enquire for a hard credit check before applying for the loan. The credit check usually takes a day or two to complete.
In most cases, the first repayment starts after 30 days. And for new cars, finance is arranged through manufacturing schemes.
Well, whatever happens, you just need to keep up with the monthly repayments every month from days onwards. However, you share the freedom to wave off the initial deposit. There is no option to miss or defer the repayments.
What Are the Requirements for Securing a No Deposit Car Finance?
The minimal requirement to qualify for no deposit car finance is a strong credit score. And it is offered only to drivers with low credit ratings. It is offered to those who share the potential of paying off the dues timely.
Individuals seeking car finance with no deposit are put to an affordability test. The test helps ensure whether the arrangement is ideal for you or does it affect their financial well-being or not.
However, passing the test becomes a tough deal without securing a deposit as monthly payments. And these are high.
Because of deposit non-payment, interest rates become higher. This makes it complicated for the companies to recover the amount if you are running through repayment hardships.
That is why it is ideal to pay a deposit first for securing the loan at a lower interest rate and pay less in the long run.
Can I Get a No Deposit Car Finance at a Bad Credit?
Has a poor credit history restricted you to secure car finance?
Does the fear of rejection make you give up on your dreams?
But the thing is, even if you have been declined a credit earlier because of poor or bad credit rating and score, you can secure a no deposit car finance.
For this, you will first need to undertake measures to improve your credit rating and score, like- paying off the dues, eliminating the use of credit cards, refraining from taking any new credit, eliminating all delinquencies on the credit report, etc.
Hire Purchase no deposit car finance is a good option for individuals with a poor or bad credit score. This arrangement divides the deposit into affordable chunks. And once approved, the creditor will work out a suitable plan that aligns well with your budget and you.
But before that, you need to analyze whether you can keep up with the repayments before entering the finance contact. Because if you cannot keep up with the repayments, you may lose your car, and your credit score will be affected adversely.
But if you can’t want to lose the car, buying the car is the only option. Look for the price drop and set alerts for the car online.
How To Compare Zero Deposit Car Finance Options?
You’ll have to think about the below highlights when looking at the qualities and shortcomings of no-deposit car loans:
a) Credit sum
On the off chance that you’re not paying a deposit, the sum you want to borrow will increase. You will borrow 100 per cent or considerably a greater amount of the worth of the vehicle you’re purchasing, so ensure you will want to bear to take care of your debt.
b) Interest rates
This is a vital variable to think about while picking a credit, as the loan fee that applies has an immense bearing on the absolute expense of the advance. Observing the least financing cost can save you a huge number of dollars over the existence of credit, so search for the lowest interest rate.
c) Fees
Discover which of the fees recorded above will apply to the loan. How will those sums affect the total borrowing cost?
d) Loan term
How long will you need to repay the cash you get? What will the credit term mean for the complete expense of the advance? For instance, assuming you pick a more extended credit term, you could get to a marginally lower loan cost. However, since you’ll make repayments for an additional long term or two, the credit will cost you more. Discuss before taking car finance bad credit and no guarantor.
e) Repayment schedule
How regularly will you want to make a repayment? What will the ordinary repayment sum be? To make an extra repayment or pay your advance off early, would you be able to do without additional charges?
Therefore, no deposit car finance is an ideal option for people with bad credit and those who don’t want to pay upfront. In addition, if you choose to pay the deposit sum, you may reduce your overall repayments and interest on the loan. Consult an advisor before signing the loan document.
