If you are gearing yourself up for the finance to buy a new or used car, it is important to make sure that your financial affairs are as healthy and robust state of affairs as possible.
Credit reference agencies
The main reason for this is that when you are buying a car on credit, one of the essential checks made by any lender is your history of past borrowing as reported to credit reference agencies. Since this might not be up to date, contain errors, or fail to reflect your circumstances in the most favorable light, it is important to make whatever changes and improvements may be made.
The credit reference agency Experian suggests some of the ways you might improve your credit rating – including the important step of disassociating yourself with someone living at the same address as you or an ex-partner, for example, whose own credit rating risks bringing yours down too.
The type of finance you are seeking
How you sort out your finances may also be affected by the type of car financing you are seeking, as well as the local market conditions where you plan to buy.
There may be major or subtle differences – which are important to understand – between a personal contract purchase, a personal loan, or a hire purchase agreement, for example.
If you are drawing on the help and advice of an independent finance broker, the differences between the various types of financing available are likely to be explained in considerably more detail – as well as the broker conducting sufficient “soft” checks on your credit status to put you in a much better position for having any eventual application for finance to be accepted. A rejection of a formal application is only likely to make your credit rating still worse.
Although your broker is likely to explain just what is involved in one finance arrangement compared to another, you still owe it to yourself to read and thoroughly understand the associated paperwork.
Your signature on any agreement might be binding you to a relatively long-term financial agreement and the cost of having to pull out of that agreement further down the line, when its implications have become clear to you, may prove costly indeed.
Think about tomorrow
On the same subject of the long-term commitment typically involved in buying a car, remember that it is not just today that you need to repay any credit you are offered.
Whether it is a contract for the lease of a car through a personal contract purchase or a hire purchase agreement, for instance, regular monthly payments need to be maintained – or you risk the vehicle being repossessed and your credit rating suffering the kind of setback likely to make applying for credit that much more difficult in the future.
What all of this adds up to is that if you have any questions about sorting out your finances or understanding the kind of agreement you might be about to enter, now is the time to ask.
There is no loss of face or embarrassment in asking those questions – much better to have them answered now before it becomes too late.