When it comes to funding a new or used car, you have various financing options to consider. Normally, there are three types of financing methods: personal loans, hire purchase and personal contract purchase.<\/p>\n\n\n\n
If your credit score is not as strong as it should be, your chances of qualifying for dealership financing are slim. Direct lenders could provide personal loans to subprime borrowers. Car finance for bad credit in Ireland<\/strong><\/a> from dealers is also available, but:<\/p>\n\n\n\n They might not be an ideal option for borrowers with adverse credit histories.<\/p>\n\n\n\n <\/p>\n\n\n\n HP and PCP are often unsuitable financing options for subprime borrowers, even though some car dealers accept applications from them. Their structure is more complicated than personal loans, and they are subject to high interest rates. Strict and long-term commitments elevate the risks of repossession and a debt spiral.<\/p>\n\n\n\n Whether you choose HP or PCP, you will need to arrange a larger deposit. Ideally, you need at least 10% of your car\u2019s value to pay upfront, but since your credit score is already compromised, you will be expected to arrange at least double. Even so, you will end up with high interest rates. For good credit borrowers, the APR ranges between 7% and 12%, which can go up to 20% in case of a bad credit rating.<\/p>\n\n\n\n If you choose HP, you might think that it is the same as a personal loan, as you are to pay down a fixed sum of money every month. The fact is that HP payments are typically more expensive than personal loans, as they charge high interest rates, and the size of the monthly payments will be quite large. This might not be a safe financing option for someone whose financial condition is unstable. People with inconsistent income will also find that HP is not a favourable deal for them.<\/p>\n\n\n\n In addition to higher monthly payments, HP is also subject to the risk of repossession. You cannot have the title of the car unless you pay off the whole balance. The ownership will remain with your car dealer until the end of the contract, and if you abdicate a repayment responsibility, your car will be repossessed.<\/p>\n\n\n\n PCPs are way more expensive than HP, especially if you do not run a fleet of cars or you do not need to change your car frequently. Here are the risks related to PCP deals:<\/p>\n\n\n\n PCP involves smaller monthly payments towards depreciation. At the end of the contract, you will have to make a full balloon payment to own it. If you decide to purchase the car, it will cost you a lot of money, much more than the sticker price of the car.<\/p>\n\n\n\n A lender will set the recommended limit for mileage. If you cross that mileage limit, you will be imposed additional charges. Do not forget that you will have to pay for wear and tear too. This will add up the cost of the car.<\/p>\n\n\n\n PCP is beneficial only for those who need to change their cars too frequently. Throughout the contract, you will keep paying towards the depreciation, and at the end of the contract, you will replace it with a new car and renew the PCP contract. If you do not need a new car, you can simply return it.<\/p>\n\n\n\n <\/p>\n\n\n\n\n
Why are HP and PCP not suitable for bad credit borrowers?<\/h2>\n\n\n\n
High costs of borrowing<\/h3>\n\n\n\n
Risks pertaining to HP<\/h3>\n\n\n\n
Risks associated with PCP<\/h3>\n\n\n\n
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How are personal loans beneficial for subprime borrowers?<\/h2>\n\n\n\n