Confused about car finance? You’re certainly not alone. Though many people decide to take out a deal to cover the costs of their vehicle, there are many myths in the area that too many people believe. Could it be the case that they are holding you back from getting the car that you really want? Here, we talk you through some of the common misconceptions, and explain the real facts that you need to be aware of.

You’re bound to get ripped off

Of course, it goes without saying that there are unscrupulous finance dealers out there who will tie you into long contracts with huge interest payments, and you need to make sure that you really know what you’re doing so you can avoid paying over the odds for your vehicle. It’s worth pointing out here though that there are many excellent providers of car finance who will do everything they can to make sure that you get a deal that suits your needs. As long as you’re careful and you do your research in advance, you should experience no problems whatsoever. The FCA (Financial Conduct Authority) regulate lenders in order to make sure that they are being honest and clear about the terms of there packages.

You must be a homeowner

You don’t necessarily need to be a homeowner to get credit. In the eyes of some lenders, it might make you a safer bet – it means that you have an extensive credit profile, and you’re capable of fulfilling your financial obligations. But if you don’t own your own home, and even if you have never had any finance of any kind in the past, you could still get a great deal from the right provider, providing you fulfil their criteria. Speak to a professional advisor for more information concerning your personal circumstances.

car finance myths busted

If you have a bad credit rating, you’re out of luck

Many people think that if they have a bad credit rating, because of late payments or CCJs, they won’t be able to get car finance at all. Though it’s true that some lenders may not accept you, it’s not totally the end of the road. Some providers specialise in giving finance to those with bad credit ratings, so do shop around and see what you can find. You might be pleasantly surprised. It’s also worth mentioning here that if you have a poor credit rating and you want to improve it, this is totally possible. You might want to start by applying for a copy of your credit report so you can see what you’re up against. If there’s anything on there that isn’t really true, you might be able to dispute it and have the records changed. This could help you if you decide that you want to buy a home in the future, for example.

Lenders judge you on your credit risk alone

What lenders are often judging is the potential profitability of a loan. The credit risk is only a part of that. For example, some applicants who have a good credit history can be rejected because the loan just isn’t profitable. They could be applying to borrow a small amount and their low risk rating will mean they get a lower rate. This reduces the profitability of the loan.

You must have a deposit

Sure, having a deposit can sometimes mean that you’ll get a better deal. It will also mean that you’ll have less to pay back. But if you don’t have a cash lump sum available, you can still get finance to cover the cost of your vehicle. Of course, you should ensure that you’ll be able to meet the payments, and that they won’t cause you any long-term financial woe. You might want to weigh up whether it could be worthwhile waiting a few months and building up even a small deposit before you take out your loan for a new vehicle.

Hopefully, this article has given you plenty of food for thought, and has really helped you to assess your options when it comes to taking out car finance. Will you be changing anything as a result?