Finance Terms
Adverse credit refers to the credit rating of a person who has a credit history containing missed mortgage, credit card or loan payments, CCJs, etc. When it comes to applying for car finance, this can affect the interest rate offered on your car loan.
APR stands for Annual Percentage Rate. It is a compound interest rate used to give a standard way in which to compare how much different car loans will cost.
Bad credit history refers to the credit rating of people who may have had financial problems in the past, including missed mortgages, car loans or credit card payments, CCJs, IVAs etc. Car Loan 4u may still offer you
car finance depending upon the nature of your bad credit history. We are experts at getting bad credit people through and accepted for car finance.
Cost to change refers to how much it would cost to change your car. The amount is calculated by looking at the difference between the value of your existing vehicle, the amount of outstanding finance and the price of a replacement car.
The credit agreement is a contract between yourself and the Finance Company. The credit agreement guarantees that you will provide the funds for the purchase of your new car and that you will pay off the car loan at the agreed monthly instalment over the contractual repayment period.
Your credit rating affects whether you are entitled to a loan and on what terms. Your credit rating will be assessed depending on how much you are earning and how you have managed your previous credit arrangements.
When you apply for a loan with
Car Loan 4u we will check your credit history with different credit agencies. Whenever a search is made on your credit record, it is recorded. If you have too many searches on your credit history over a short period of time it may have a negative impact on you ability to get a car loan.
Most cars depreciate (become less valuable) over time, unless they become collectable. Depreciation refers to the extent to which a car has lost value.
Equity refers to the difference between the value of the car, and the remaining sum left to pay on the loan. Equity can be positive or negative.
Fixed rate means a loan on which monthly repayments are fixed. They will not fluctuate in line with changes to the Bank of England base rates.
Flat rate is the monthly interest rate. Unscrupulous finance providers sometimes quote the flat rate instead of the APR because it sounds less expensive.
Forecourt finance may be offered by car dealers where you purchase a car. However, the rates offered are rarely the best in the whole market and it is always worth shopping around for car finance to find the best deal. Car Loan 4u are the market leaders in our sector.
If your car is written off, you will be eligible to repay the remainder of the car loan. Car insurance will usually only pay out the value of the car at the time of the accident or theft; it can happen that this is less than the money outstanding on the car loan. Gap Insurance has been designed to make up this difference, and is offered as an extra on most car Finance agreements.
Hire purchase is the
car finance provided by Car Loan 4u. When taking out hire purchase, you pay a fixed monthly repayment. Although you can drive the vehicle from the first day, you don't own the car until you make the final repayment and complete the car finance agreement.
Hire-Purchase (HP) has long been a popular way of providing credit to pay for major items, such as, cars, furniture and computers. It is the most commonplace form of lending for financing the purchase of cars. The supplier of the goods will sell the goods you are buying to the lender who then "hires" them to you under the Hire-Purchase Agreement. Whilst the agreement and how you make your payments may appear very similar to other commonplace loans such as those offered by high street banks, there are some key differences.
All forms of consumer credit including HP fall under the regulations of the Consumer Credit Act as well as other consumer credit regulations overseen by the Office of Fair Trading (OFT). With purchases made with other forms of credit such as Personal Loans or Credit Cards, the goods you buy belong to you straight away. However when you use HP you should note the following:
- Your contract is with the lender (the finance company), who own the goods until the final payment is made.
- You don't legally own the goods until you've paid back all the money you owe. The lender is the legal owner. This means that you cannot modify or sell them without the lender's permission. If you do so then you will be in breach of contract (or even the law in some circumstance) and the lender may bring the agreement to an end and seek recovery of the goods, compensation or both.
- You may have to pay an "Option to Purchase Fee" or "Option Fee" with the final payment. The payment of this passes legal title from the finance company to yourself and the goods become your absolute property. The amount varies from lender to lender.
- You will be liable for any damage or total loss caused to the goods during the contract period so having adequate insurance (fully comprehensive for cars) is very important. For example, if your car is written off and you have inadequate insurance you will remain liable for all the monies still owed to the lender.
- Under a HP agreement, you usually pay an initial deposit followed by equal monthly payments (which comprise a portion of the money you borrowed, interest charges and any other fees) over an agreed period. The vast majority of HP agreements are with fixed interest rates which means that the amount of interest you have to pay is pre-determined and doesn't change provided you keep to your side of the agreement.
- The finance company can take the goods back if you don't keep up your repayments.
This is the charge for credit based on the value of the car finance you apply for and your credit history.
This is the minimum amount (£2,000) that Car Loan 4u will offer as a car loan.
This is the maximum amount (£100,000) of car finance that Car Loan 4u will offer.
Negative equity is the amount owing on the hire purchase agreement that exceeds the present value of the car.
Part exchanging your old car as part payment for your new car is a common process. To get the best value make sure that your car is in the best condition possible when you take it to the car dealer.
Payment Protection Insurance is an optional insurance sometimes referred to as (PPI). This is another name for Payment Protection Plan (PPP) as explained below.
Payment Protection Plan (PPP) is an optional insurance offered by Car Loan 4u. PPP covers the borrower should they find themselves in circumstances that prevent them from making car loan repayments. This could include: inability to work, disability, unemployment, through redundancy or serious illness (subject to terms and conditions).
The value of your car once all of the factors (depreciation, condition and mileage) that effect the value of your car have been taken into account.
Your
car loan or
car finance is secured on the car. This means that if you fail to meet the agreed payments by Car Loan 4u we can repossess your car.
Trade value refers to how much the car is worth if the car dealer was to sell your car at auction or to another car dealer.
This means that the interest rate can go up or down depending on the Bank of England's base rate as it fluctuates during the term of the loan. Car Loan 4u does not offer variable rate loans.
When you see a car that you’d like to buy, before you can use Hire Purchase to buy it, the finance company need to value the car you have chosen using independent information sources and their industry knowledge. If the price the car dealer is asking for the car is more than the permitted amount over this valuation, the finance company would not be able to lend you the full amount to purchase the vehicle. If you still wanted to buy the car then you would need to make up the difference using a part exchange, a deposit or a combination of both. For example, if a finance company is willing to lend 5% over their valuation of a car and the car you want to buy has a valuation of £5,500 but a forecourt price of £6,000, you could only borrow £5,775, even if you have a credit limit of £8,000. This is one of the reasons why it is essential to call Car Loan 4u as soon as you’ve found a car you’re interested in so we can check out the price and let you know how much we could lend towards it.
Car Loan 4U is authorised and regulated by the Financial Services Authority, and licensed by the office of fair trading under the consumer credit act 1974. Licensed Credit Broker. All finance is subject to status and income. Written Quotation on request.
Registered office: Car Loan 4U Ltd, Winterton House, Winterton Way, Macclesfield, Cheshire, SK11 0LP.
Registered in the UK. Tel: 0871 220 6007
