How do car loans in the UK work?


A car is almost a basic necessity for every family. However, with the ever increasing prices of new models of cars it is quite impossible for most people to arrange for the payment without any outside help.

A majority of people in UK are of modest means and would rather prefer to apply for a car loan. Before you begin searching for the companies that currently offer these loans in UK, it would be important for you to understand what you are getting yourself into.

What would lenders expect the borrowers to have?

Typically, before providing an approval for a car loan, the lenders would check for a few essential details to ensure that you are:

* Earning a verifiable income. Lenders would want to ensure that your monthly income is enough for you to be able to repay the loan.
* Lenders will want to check that you are employed. Self employed applicants generally have to face a few problems when applying for a loan.
* You must have a permanent address in UK
* You must have a reasonable history of credit in the past
* You should also be a resident of UK

How does the process work?

Applying for a car loan is relatively easy today compared to what it had been in the past. With the introduction of online applications, you will simply have to log on to the website of a lender, fill up a short application and submit it.

A representative would soon contact you to take further details along with the basic documents like the income proof, residence proof and identification proof. If you are approved for the loan, the amount that you had requested for would be transferred directly to the car dealer for the payment of the selected car.

You would then be able to drive away your car. The repayment for car loans is in the form of monthly installments over a fixed period of time.

Sources of car loans:

There are several sources that you may want to explore for car loans. Typically you will have the below mentioned options available:

* Car loan through a bank
* Finance through a manufacturer provided finance or a dealer
* Credit cards
* Through a specialist car finance company

Each of these sources will have their own pros and cons so you will have to research well before you select one of them for your next car loan.