Thursday, September 6, 2012

Two Myths About Guaranteed Car Finance Arrangements

Two of the biggest myths when it comes to car finance and in particular guaranteed car finance are that you either have to wave goodbye to any kind of choice, and that taking out a guaranteed car finance car loan will harm your credit worthiness.

In this article we are going to look at both of these myths, understand where they have come from and why people believe them to be true, and understand exactly what the reality is.

The past couple of years have certainly been rather unkind to many of us, with finances being stretched to breaking point. This has resulted in many families being forced to make tough choices, often with the result that bills remain unpaid just so that food can be put on the table.

A credit card bill seems somewhat less important that eating at a time like that, but from the point of view of the credit card companies, anyone who doesn't pay their bill on time is a debtor, and this can result in credit histories being marred by entries which list the number of missed or late payments.

A credit history may well contain several such examples of this, and may also include problems such as arrears, defaults and even CCJs. Although the recession is now over, and finances are picking up, many people are finding that the damage caused is likely to be with them for a good many years.

Many entries made on a credit history must remain for six years before they are removed, which could mean that whilst the recession lasted just two years, the consequences could still be being felt in 2016 for those whose credit ratings have been damaged.

It is for this reason that a greater number of people than ever before are turning to guaranteed car finance firms for solutions. Trying to obtain a car loan or car finance with bad credit can be next to impossible, and in the wake of the recession most lending institutions have tightened their belt and increased the minimum level of credit worthiness required before being willing to offer any kind of finance.

Guaranteed car finance does seem to offer a solution, yet with the two most popular myths circulating widely a good many people who would otherwise benefit from such a scheme are choosing not to explore their options.

The first myth is that choosing to accept an arrangement for guaranteed car finance is choosing to give up any choice you may have had in terms of what car you can purchase. The reason this myth abounds is because there are examples where it is true.

In several cases car finance firms will offer customers what appears to be quite a generous offer of a car loan. However, what then becomes apparent is that the car loan can only be used to purchase a car belonging to the car finance firm itself.

Since car finance firms are rather different entities from car salesrooms, their expertise, range and quality is not always likely to be as good as you might want. But in almost every case you don't even get to choose any car from the range, but will instead be offered two or three cars to choose from.

But although this myth is true in some cases, it isn't true across the board. There are plenty of examples where car finance can be offered, and which is guaranteed, yet the customer is still free to choose to spend it on any car from any dealer anywhere in the UK.

So as far as this myth is concerned, it pays to look around and find a guaranteed car finance firm able to offer not only cheap car finance, but choice and freedom as well.

As far as the second myth is concerned, this is entirely untrue. Some people feel that having a guaranteed car finance arrangement set up will somehow damage their credit rating, since other financial institutions may see it as being evidence of a murky past.

This is quite false, and in fact the complete opposite is true. Having a guaranteed car finance arrangement will almost certainly improve your credit rating, as long as you make your payments in full and on time. This is because each month you make a payment the car finance firm will record this as a positive entry in your credit history. The more positive entries, the higher your credit rating.

So be aware of these myths, but be aware of the truth behind them as well, and when it comes to looking for car finance, make sure you choose carefully.

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