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How to take a car in instalments in the UK?

How to take a car in instalments in the UK?
Buying a car in installments is a convenient solution not only in Poland. Drivers in Great Britain also willingly use this option when looking for the best installment loan offers. While we all know our home market well and know where to go for such a loan, living in the UK as a foreigner can feel a bit lost. Can you buy a used car with a loan here? How to take a car in installments in the UK?

In this article you will learn:


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Car loan in Poland

If you want to buy a vehicle with an instalment payment, we usually go to several banks or agencies. We initially ask about the current offer, the interest rate on the loan, the number of instalments and the possibility of early repayment. Alternatively, if you buy a used car in a second-hand shop or from a car dealership, we can ask about the possibility of crediting here. This solution is so popular that there is no longer even a need to appear in the seller’s office in person. We will get to know offers for credit or leasing online, using websites specialised in this field – for example here . If the buyer can demonstrate an impeccable credit history, he chooses the most advantageous offer and concludes the contract.

Is it similar in the UK?

Car loan in the UK – what is worth knowing

  • APR – Annual Percentage Rate – annual interest rate.
  • Debt-to-income – the ratio of the applicant’s total income to his fixed monthly expenses. Each lender has its own guidelines as to the maximum percentage of the loan instalment in the borrower’s liabilities. Some banks recognise that the instalment cannot exceed 40% of income, others that 30%.
  • Early Repayment Charge – a fee charged by the bank / company in the event of early repayment of the loan than provided for in the concluded contract.
  • Set Up Free – usually a fixed fee that the bank / company imposes right after granting the borrower a loan.
  • Secured Personal Loan – an element of the concluded contract is a declared object (car, real estate), which constitutes a pledge in the event of the loan being unable to be repaid. This, of course, is not a collateral that the lender uses because of, for example, late repayment. The pledge will be seized only when the borrower declares that he is no longer insolvent. The advantage of such a clause is the bank’s greater flexibility in granting the loan amount or lowering the standard interest rate.
  • Unsecured Personal Loan – similarly to the point above, it is a loan without collateral in the form of a pledge. It usually results in a higher interest rate and/or less freedom to adjust the repayment period of the loan.
  • PPI – Payment Protection Insurance – another form of security, this time with greater benefit for the consumer. In this case, the bank proposes to pay a certain amount once or as part of an instalment, as insurance against loss of job or part of income. 
  • PCP – Personal Contract Purchase – a type of contract that is closest to the known leasing. The buyer makes a deposit right after concluding the loan agreement, then pays monthly instalments in the agreed amount, and at the end has the option to pay the final amount (balloon payment) and become the owner of the vehicle. If the borrower resigns from paying the balloon payment, then the contract ends and the car is returned to the dealer.
  • HP – Hire Purchase – instalment loan spread over monthly payments, but the deposit must be settled in the agreed amount first.

It is worth noting that in the case of the last two offers (PCP and HP), the borrower becomes the owner of the car only after making the last instalment or final repayment – i.e. balloon payment.

How to take a car in instalments in the UK?

Buying a car and creditworthiness

As in Poland, British banks and credit companies use the credit score before agreeing to conclude a contract. Credit Score is a parameter that expresses the creditworthiness of the applicant on a point scale. Importantly, each bank or other entity you ask for an assessment of your creditworthiness develops such a scale on its own.

An example rating based on the Historia Creditowa website:

  • 961 – 999 points – the highest level, showing an excellent credit history. You can go to the most demanding facilities without fear, you can also count on a wider range of offers presented to you. 
  • 881 – 960 points – good ability, sufficient to apply for loans also in more demanding banks. In this case, however, you will receive fewer offers and they will not always be the best offers that the facility has prepared for its clients.
  • 721 – 880 points – you will receive a loan, but the terms will certainly not be very favorable. You won’t be able to afford every car model.
  • 561 – 720 points – ability at a low level, insufficient to obtain a positive opinion in most banks and branches. If you manage to win the favor of the lender, then you can be sure that the interest rate will be high, and the contract may be subject to additional security.
  • 0 – 560 points – a very low ceiling, which indicates that you have most likely struggled with debt repayment in the past. Perhaps there are still liabilities on your account after the due date – loan instalments, bills. In this case, you will not receive another loan for sure. You will even have trouble concluding a subscription contract for the telephone, internet or even car insurance that you plan to buy. A car in instalments in the UK is unfortunately not an offer for you.
How to take a car in instalments in the UK?

How to take a car in instalments in the UK?

Let’s get back to the leading question. As you have probably already deduced from the content of the article, the possibilities of obtaining financing for the purchase of a used or new car in the UK are very similar to those you know from Poland. You can go directly to the bank or banks and ask about the installment loans offered. Another possibility is to use the offers of consignment shops or dealers. However, they also use banks, usually acting as an intermediary in concluding a loan agreement. Finally, you can also go to a multi-agency that will screen the offers of many banks for you and choose the best one. 

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