Car finance is one of the most common examples of how we pay for ‘large ticket’ items, and a good credit rating can be the difference between getting a good interest rate or not, or sometimes getting any deal at all.
What are your car finance options?
If you decide to borrow credit to buy a car, the marketplace is vast, with plenty of rate and payment options. It’s worth comparing different loans and methods of finance so you get the one that’s best suited to your needs.
I’ve had a car on finance, but it’s not really suitable for my daily use. Will voluntarily terminating my car finance agreement affect my credit score and could it prevent me from getting another car on finance?
Nicola, Port Glasgow
Ending a car finance agreement early using ‘voluntary termination’ is your legal right, as long as you’ve paid at least half of the total amount due and you hand the car back in satisfactory condition. You should then be left owing nothing and the lender should update your credit report to reflect this. The lender may also add a voluntary termination marker to the entry on your credit report which explains to other lenders why the finance was settled early. Your credit score should not be affected, as long as you have paid all of your monthly payments on time up to the point you hand the keys back, so you should not see any late payments registered. Lastly, unless any lender you approach has a policy of not lending to people who’ve opted for a voluntary termination in the past – and I’ve not seen any evidence of this – then it should not affect your chances of securing credit in the future. (January 2016)
You can find archived Ask James questions arranged under subject headings such as ‘applying for credit’, ‘credit and debt’ and ‘fraud’ at the main Ask James page.
Guest post from Danielle Mannus, Social Media Manager at Zuto
With car finance, a good credit rating can make the difference
Buying a car is one of the biggest purchasing decisions most people make and, with 75% of new car purchases involving finance, getting the best car finance deal available is really important.
As with most types of borrowing, car finance lenders review applicants’ financial records with credit reference agencies when deciding whether to offer finance, how much to lend and what interest rates to charge. This means that viewing your credit report before applying for car finance, and making any changes that you can to improve your creditworthiness, will help you to get the best car finance deal available.