Cash strapped buyers can get car finance at super low-interest rates

There are those of you who will be strapped for cash, but also very much in need of a car. This could be because you have invested so much of your own money into your startup business or a whole host of other reasons. Hippo Motor Finance wants to help you.

Everyone should have the opportunity to own and drive a car. Car finance is an excellent way of getting a car on affordable budgets through having low-interest rates. There are various ways you can ensure you have lower monthly payments on your car finance

What is car finance?

Car finance is the act of purchasing a car over an agreed period of time by paying a monthly amount until you have paid off the value of the car. This can be done by either just paying the monthly amounts through Hire Purchase or paying monthly amounts followed by a balloon payment at the close of the agreement as you do with Personal Contract Purchase.

It is the most popular course of action to take for those looking to own a car instead of just lease a car.

Paying that deposit

One way to lower both the interest rates and the monthly amounts you will pay is by paying off a large chunk of your agreement off right at the start. This comes in the form of a deposit, which you can choose to pay. Deposits come in three forms under a car finance agreement.

  • Deposit worth three months of payments
  • Deposit worth six months of payments
  • Deposit worth nine months of payments

The higher the deposit you pay, the lower your monthly payments will be as a result. If you choose not to pay a deposit, the amount you would have paid is spread evenly across the series of monthly payments.

Have an excellent credit score

Your credit score is the most important factor in terms of having low-interest rates and low monthly payments. There are five levels in a credit score.

  1. Excellent
  2. Good
  3. Fair
  4. Poor
  5. Bad

If you have a fair to excellent credit rating you have a high chance of being accepted for car finance. If you have excellent credit score, you will have the lowest interest rates available. This means you will also have the lowest monthly payments.

Ensure you have the best credit rating possible, and you will discover you can acquire a great car for the lowest possible amount.

The duration of your car finance

Length matters when it comes to car finance. If your aim is to have the lowest monthly payments available, the longer the agreement the better. This is because the value of the car is spread out across your agreement, so the longer it is the more time you have to pay off the value.

Car finance agreements usually last between 24-48 months but can go to the maximum of 60 months. Whilst your monthly payments and interest rates will be lower, you will pay more interest over those 60 months than you would on a shorter finance agreement. Simply, you will pay less each month, but more in the long run.

So, that balloon payment?

Under a Personal Contract Purchase or Business Contract Purchase, you have the option to pay a balloon payment when the agreement comes to a close. This allows you to take ownership of the car in full.

The balloon payment is the Guaranteed Minimum Future Value that is calculated at the beginning of the agreement and represents how much the car should be valued after the duration of the agreement. Under either a PCP or BCP agreement, you can choose to pay the deposit or return the car. This car finance option results in you having lower monthly payments and low-interest rates.