Choosing the best finance option

Buying a car is usually the second-largest purchase anyone makes in their lifetime, with the largest being a house. How to finance such a large purchase can be a bit of a minefield and you need to decide whether to go directly to the bank for a loan or go to a specialist finance broker. There are advantages and disadvantages with each of these, as well as a plethora of financial products available, so some careful research into how well each product matches your individual circumstances is advisable.

Applying to the Bank

If you are lucky enough to have a perfect credit rating and a good working relationship with your bank then using them to obtain a loan would appear to be the most straightforward route to go. The bank may be happy to give you an unsecured loan to buy a car or they may wish to secure a loan against your house. High-street bank-lending rates tend to be some of the most competitive on the market, but they have a limited number of products available and are less flexible about how they provide a loan. If your credit rating and relationship with your bank is far from perfect, the chances are that you will be turned down by high-street lenders who shy away from anyone who looks like a possible risk.

Seeking out a Broker

The main advantage of using a car finance broker is that they know their business inside out. They have access to a wide range of financial products, many of which have been created to work for different individual circumstances. Brokers see the trends in the market and have relationships with a wide number of lenders, so they can often offer special deals or discounts as well as products that are not available on the open market. They have the ability to find the most suitable lender for the borrower’s specific circumstances.

A further significant benefit of a car finance broker is that they take care of all the paperwork and the communication with the lenders on your behalf. This saves time and helps to prevent stress, which is an important factor for many people who apply for a loan through a broker. Because brokers develop personal and professional relationships with the agents of big lenders, they can often reduce the processing time of a car loan application.

On the downside, a broker cannot live on fresh air so any loan taken out may come with a fee. If you are using a broker because of a poor credit rating you must also expect to pay over the odds in interest payments as any lender needs to offset the risk you pose of defaulting on the loan.

Weighing up the Choices

Each individual should make this important decision based on their own unique circumstances. There is no right or wrong answer that suits every person looking for a car loan. It is essential to research and compare the options available and, most of all, be realistic about how affordable monthly payments will be.