FAQ - EG Bad Credit Car Loans

A: Yes, there is usually a car loan for everyone, even if you have bad credit or if your county court judgements have been cleared, but you will pay much higher interest rates and may not be able to borrow as much as you'd like. There are companies specifically set up to find car loans and finance for people who have perhaps been refused a car loan from the main high street banks and lenders. Independent car loan brokers can usually assist too.

What are Balloon payments?

A: A balloon payment is the final payment due to clear the loan which is made at the end of Personal Contract Purchase (PCP) agreement, when the customer wants to buy the car outright. They are called balloon payments because they can be quite large, sometimes around half the total amount borrowed. Some people pay the balloon payment by trading in the car, using the trade-in value to cover the outstanding debt and applying any surplus as deposit on a new car.

What does APR mean?

A: APR stands for Annual Percentage Rate. This is the interest rate that will be applied to your car loan or car finance, it is calculated as a percentage of what you borrow and charged as an annual interest charge. So an APR of 8% means you pay £8.00 per year, for every £100 borrowed. This is an important charge you should be aware of when selecting car loans as the lower the APR, the less it will cost you. However, the the APR rate may not include all the related car finance costs so check these too before accepting a deal. The actual APR you may be offered is dependent on the amount you borrow and your credit history.

What is Gap Insurance?

A: GAP Insurance (sometimes also known as Shortfall Insurance) is an optional insurance plan that supplements your main motor insurance cover. It is designed to provide additional cover to repay your remaining car loan or finance balance in the event that your car is stolen or written off. Your normal car insurance is based on the value of your car but your car loan or finance will usually be for more than the value of the car after interest and charges are applied. Gap or Shortfall insurance provides protection when your main car insurance pays out for the loss of the car but does not cover the full amount you may still owe on your car loan or finance agreement.

What is Payment Protection Insurance?

A: This is an optional type of insurance which you can take out to cover your regular car loan or finance repayments in case you are unable to make your repayments in the event of sickness or loss of income due to redundancy. Having this insurance would mean your regular payments would be maintained which would prevent your car being re-possessed at a time when you might need it the most.

What are refinancing car loans?

A: Refinancing is a term used when a new loan or finance agreement is used to pay off the balance of an existing loan. Refinancing car loans are available for people who either want to transfer an existing car loan or finance agreement to a new one which may have a lower interest rate to reduce their debt, or are struggling to meet their existing monthly repayments and need to reduce them by extending the term of their loan. The amount you borrow for a refinancing car loan is usually the remaining balance on your existing car loan, for example you may have taken a car loan out for £8,000.00 for a term of six years, two years ago, and have already repaid £3,000, so your refinancing loan amount would be for £5,000.00 which you could then repay over another six years for a much lower monthly amount.