Car Loans
A car loan is, as the name suggests, a loan you can take out towards getting a new car if yours is either beyond repair or is getting to costly to constantly keep repairing every time it breaks down. As with other types of loan you can get a personal or a secured loan depending on your situation and a financial advisor will help you make the decision.
Personal car loans can get you up to £25, 000 towards your new car, and because they’re unsecured you have to offer your home as collateral. Also, the interest rates are usually lower than those offered at the car dealerships in their payment plan. However, you need excellent (or good at the very least) on your credit report to obtain this kind of loan and the repayment period is only 1-5 years.
Instead of this you could go for a secured car loan instead. This gives you a greater chance of being accepted for the loan than a personal loan as you have collateral to offer and, depending on the value of your home, you can borrow up to £100,000 which you can pay back in 5-25 years with a much lower rate than personal loans. This is also easier to get if you have a bad credit history. However, all though it is easier to obtain it may take longer to actually get than a personal loan and you do have to be a homeowner to obtain one.
Some lenders will want to know which car it is you’re buying before they give you the loan, and all car dealerships will want you to have money or financial security before you actually buy. Generally you don’t need more than £25,000 for a car loan, making a personal loan the more popular choice when it comes to this kind of loan- though you do need a strong credit rating. Shop around and ask the dealership you’re buying from and your bank for advice on which would be the best course of action for you so you’re borrowing the right sort of amount for the car you want.
IVA assistance
An IVA is an Individual voluntary agreement to help you make reduced monthly payments to the places you owe money to so you can pay off a percentage of your debt so you don’t end up bankrupt. An IVA is usually set up for 5 years, after which the debt is classed as settled and any extra charges become frozen and it’s illegal for creditors to demand the extra money from you. Because of the legal technicalities of this, it must be set up by a licensed insolvency practitioner and the creditor must agree to it. Once the payment period is over in some cases up to 75% of your debt can be wrote off.
The main advantage of an IVA is getting your debts reduced and protecting you from bankruptcy. It ensures your home and job are protected and because you’re not bankrupt you aren’t given limitations on things like personal credit and mortgage applications. Plus, as a bonus for the creditors it’s actually cheaper for them than the costs for bankruptcy.
However, there are a few disadvantages. You can only have an IVA if your debts are over £15,000 and, unless stated, your house and any other security could be at risk if you break the agreed contract. So, if you don’t comply with the agreements your creditor could take further action and you could well end up bankrupt.
You have to remember that the payment will be worked out on what you’re earning and what you can afford each month and any extra you get will have to put into your repayment plan and not use for personal spending. This means you’ll have to make a lot of cut backs during your repayment time and be as upfront as possible with your creditor regarding your finances. Illness or redundancy will be taken into account by your creditors and a break can be arranged if this happens to give you time to get back before you’re back to repaying. This will affect your credit rating but once it is paid off it will be wiped from your record, though it will take around 12 months for you to rebuild your credit rating to its previous status.