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Car loans

Compare car loans and choose the best deal for you 

  • Search leading providers
  • See your chances of being accepted
  • Won’t harm your credit score

We compare offers from a wide range of lenders from across the market

We work with over 30 loan providers including most of the big brands to help you borrow the money you need.

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Is a car loan right for you?

Using a personal or unsecured loan to pay for a new car has many benefits. For one, when you pay for your new wheels using a car loan you won’t need to enter into a contract with the car dealership. This puts you in control. You’ll know exactly what your monthly repayments will be. Plus, when your loan term ends you’ll own the vehicle outright.

You can use an unsecured loan to buy a new or used car – from any forecourt or dealership. We can help you search the market to find the best loan deal for your needs.

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How do car loans work?

If you don’t have the cash or savings to buy your new car outright then a personal loan can be a cheap and convenient way to borrow. But think about what you need before you apply. Here’s how it works:

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Loan size

Loan providers will typically offer up to £25,000 on an unsecured loan, dependent on your credit rating. Need to borrow more? You’ll probably need a secured loan. With a secured loan the borrowing is secured against an asset, such as your car or your home.

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Decide on the term

The time frame – known as the term – for personal loans, typically runs from one year up to seven years, so think about how long you want your loan to run for. A longer term will mean lower monthly repayments but more interest (APR) to pay overall - so it's best to weigh up your options.

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Choose a loan deal

We’ll show you the car loans you’re likely to be eligible for – without it affecting your credit score. Then you’re ready to choose the best one for your needs – based on the interest rate, term and any fees. You’ll be told what the monthly repayments will be.

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Start repayments

Once accepted the loan proceeds are paid into your account so you can pay for your new wheels. Monthly repayments will begin immediately. Any missed repayments will impact your credit score. Missed payments could mean your car or home is at risk.

What will a car loan cost?

How much a car loan will cost you will depend on how much you need to borrow, the loan rate or interest rate you’re offered (and this will depend on your credit rating) and the term or time frame you want to take out the loan. Longer loan terms will generally mean your monthly repayments will be lower – but you’ll pay more interest in total over the term, compared to taking a loan over a shorter term.

It is also worth noting that smaller loans, typically under £2,000 tend to have higher interest rates.

Our car loan calculator can help you see how much different loan amounts are likely to cost you at different interest rates. This can help you work out what you can afford to borrow for your car purchase before you visit the dealerships. By way of example this table shows the cost of a £10,000 and £15,000 loan at a competitive 5.5% interest rate.


Loan amount

Loan term Monthly repayment* Total interest cost

£10,000

5 years £190 £1,424
£15,000 7 years £215 £3,026

*Monthly loan repayments based on representative 5.5% APR. Interest rates will depend on your credit rating.

How to get our best car loan deals

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Suitability

Only borrow what you need and can afford. Think about the interest rate you will pay. The bigger your car loan the more you’ll be paying back over the term of the deal. If you think you may be able to repay the loan early look at the terms and conditions and consider any early repayment penalties.

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Term of the deal

How long do you want to borrow the money for? Taking a longer-term car loan should bring repayment costs down, but remember you’ll be stuck with the debt for longer and will pay more interest in overall. Try to strike a balance between what is affordable but not paying more than you need.

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Check your credit report

Get hold of a free copy of your credit file before applying for your car loan. This way you can check all the information is correct and that there won’t be any issues that stop you getting a great deal for you. There could be some simple ways to boost your credit score and drive down the car loan rates you’re offered.

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Shop around

Let us take the hard work out of finding our best car loan to suit your needs. Our eligibility checker service allows you to search across leading brands in the market to source the best deals – but without performing a ‘hard’ credit check which could affect your credit score. This way you’ll know where you stand before you apply.

Know where you stand with a pre-approved car loan

When you’re pre-approved for a car loan, you can relax knowing the deal you see is the deal you’ll get. You’ll be a step closer to driving that new, sweet ride with peace of mind in the passenger seat. You’ll know where you stand with the facts to help you make the right choice.

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Apply with confidence

When you’re pre-approved, the loan amount, duration and interest rate are all confirmed 

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Tailored to you

When you know what you’ll be able to borrow and how much it will cost, you can choose a loan that’s right for you 

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You’re in safe hands

Knowing the facts upfront puts you in control. You’re less likely to be rejected when you apply, so your credit score is protected 

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Can I get a car loan with bad credit?

We know it can be worrying searching for a loan when you’ve got a poor credit history. But it could still be possible to get a suitable car loan, even if your credit score is low.

Your choice of products may be more limited if you don’t have a high credit rating, but there are providers who specialise in loans for people with less than perfect credit ratings so you could still find a suitable loan deal.

Bear in mind that if you do have poor credit you are likely to be offered much higher interest rates, compared to standard car loans. You may also not be able to borrow as much money. But if you think this option could still be suitable for you, MoneySuperMarket can help you search what’s available without further harming your credit rating.

Representative 32.3% APR

Is a car loan right for me?

There are many different finance options when it comes to buying a car and it can feel confusing. Here are the pros and cons of choosing a car loan:

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    Advantages:

    • A personal loan will often work out cheaper than dealer finance
    • You’ll own the car as soon as you’ve paid the seller the cash 
    • Car loans are simple and straightforward – with no complicated terms and conditions, as can happen with personal contract plans and hire purchase
    • You can buy any new or used car from a dealer or private seller
    • Choose the terms of your car loan – how much you borrow and the term
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    Disadvantages:

    • It could be more difficult to haggle on the price of the car if you’re not taking the dealer’s finance
    • Personal loan rates can be high unless you have an excellent credit score
    • As you’ll own the car you’ll be responsible for repairs
    • Monthly repayments could be higher compared to PCP or leasing
    • Unlike some car dealership packages you won’t have the option to easily swap your car for a new model every few years

Alternative ways to finance a car

Motor dealerships and specialist finance companies offer a range of products to help you purchase a car, when you don’t have the cash to buy outright: 

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Personal contract purchase

Put down a non-refundable deposit and borrow towards some of the remaining value of the car - you won’t buy the vehicle outright. At the end of the contract you’ll have the option to make a large final payment (sometimes known as a balloon payment) to keep the car or you can return it and take out a new PCP on a fresh car

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Hire purchase

One of the most common options for car purchase - you pay a deposit (usually 10%) and then make monthly payments to a car finance company. You’re technically paying to hire the car and you’ll only own it after you have made the final payment plus any ‘option to purchase’ fees on top. There are not usually any restrictions on your mileage 

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Leasing – Personal contract hire

Pay a small deposit then fixed monthly payments to lease the vehicle. Servicing and maintenance is usually included as long as you don’t exceed a pre-agreed mileage. At the end of the lease you hand the car back – so it never belongs to you and there is no option to buy. Offers the flexibility to always drive a new vehicle but contract terms can be strict

Compare car loans with MoneySuperMarket

Find the right car loan for you - and see which rates you'll be guaranteed to get

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It doesn’t take long

Tell us a little about yourself, your finances and the loan you want

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We’ll browse the market

We’ll search through car loans from a wide range of lenders on the market

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Compare loans

You’ll be able to sort car loans by the overall cost and the likelihood you’ll be accepted

 

Most of the main high street banks offer personal, unsecured loans which you can take out to buy a new or used car. If you apply to a bank for a loan it will conduct a credit search on you to work out whether or not you can afford it. In contrast, if you look for a loan through MoneySuperMarket we can search the market without doing a ‘hard’ credit search, so it won’t impact on your credit rating. Then you can see which loans from across the market including the major banks – and at what rates – you might be eligible for before you apply. This cuts down the risk you will be rejected for a loan.

 

The APR or interest rate you’ll be offered on your loan will depend on your personal financial situation and your credit score. The better your credit rating, usually the lower the loan rate you’ll be able to get. The best rates are usually also available on larger loans – so typically those wanting to borrow around £5,000 or more. As a general rule smaller sized loans tend to have higher interest rates.

 

Car finance is a catch-all term used to describe different ways you can pay for a car on credit – if you can’t afford to pay in full in cash. Car dealerships will typically offer ‘finance’ which may be in the form of a loan or personal contract plan or even hire purchase. Ensure you fully understand the terms and cost of any car finance plan before you sign on the dotted line. Some payment plans are complex and may have strict conditions of use, such as a maximum annual mileage. 

As an alternative to dealer or specialist car finance you can just take out a standalone personal loan to pay for your car. 

 

As with any personal loan application you will need to provide information about yourself when you apply. The loan company will need your name and address (and any other addresses you’ve held over the past few years), plus details about your job, your income and your household budget – incoming money and outgoings. When you make a full online application the loan provider will conduct a credit check and look at your credit history. This is to assess whether you can afford the loan.

It depends on the loan provider but it is usually fairly quick. Once you’ve been accepted for a loan the cash could arrive in your bank account within hours, but more usually within a couple of days.

You can use a secured or an unsecured loan to pay for a car. With a secured loan you must put up an asset – usually the vehicle you are buying – as collateral, so the loan provider would repossess it in the event you were unable to repay. This does not happen with a personal or unsecured loan.

You can take out an unsecured personal loan or a secured loan through MoneySuperMarket and use it to pay for your new car.

You can usually pay off your loan early, but you may have to pay an early repayment charge. Ask your lender to send you an early repayment settlement amount so you can see how much the charges will be.

It isn’t usually possible to increase the amount of your personal loan once it has been agreed and paid out to you. If you need to borrow more you will usually need to apply again for another loan – and the rates and terms and conditions may be different to your first loan.

Many households are struggling to make ends meet as the cost of living keeps rising. There's little spare cash around to build up an emergency fund, which means it can be tricky to pay for a new washing machine or boiler if your old one breaks down. Maybe you need a new car, or perhaps you're planning a holiday, a wedding or a home makeover?

Let’s face it, most people at some point in their lives need to borrow some money. So it’s important to understand the pros and cons of the different types of loan, as well as how to secure the best rates. If not, you could end up with a poor deal – and costly credit can send you into a downward debt spiral.

Loans can broadly be divided into two categories: secured and unsecured. With a secured loan, the lender will insist on some sort of security against the money you borrow, often a house or car. If you default on the payments, the bank or building society can then sell the asset to clear the debt.

You can usually borrow large amounts with a secured loan, and at a lower rate of interest. Plus, you can pay back the debt over a long time period, perhaps 10 or 15 years.

However, secured loans are more risky than unsecured loans because you could lose your collateral if you cannot clear the debt. You should therefore think very carefully - and consider other options - before taking out a secured loan.

You can typically borrow as little as £1,000 up to a maximum of £25,000 with an unsecured loan – also known as a personal loan.

The interest rate is usually fixed and you pay back the debt over a set term, normally one, three or five years. Personal loans can therefore help you to budget because you know at the outset the full cost of your borrowings and how long they will take to clear.

For example, if you are getting married and the wedding is set to cost £7,500, you could take out a loan for £7,500 at 3% over three years. Your monthly payments would be fixed at £217.98 and you would pay total interest of £347.11 over the 36-month term.

Representative example: If you borrow £7,500, you would make 36 monthly repayments of £217.98. The total amount repayable is £7,847.11. Representative 3.0% APR, 3.0% (fixed) p.a.

If you have run up other debts at high rates of interest, a personal loan can be a good way to manage your borrowings and bring down the cost. Let’s say you have built up a debt of £3,000 on a store card that charges interest of 29%. You could take out a loan for £3,000 at, say, 9%, to pay off the store card balance and reduce the monthly payment. If you also cut up the store card, you would not be tempted to go on a spreading spree and add to your debt burden!

Interest rates on personal loans vary across the market, but as a rough rule of thumb, the more you borrow, the lower the rate. For example, you might pay interest of 9% on a £3,000 loan, but only 3% on a loan of £7,000. It can therefore make sense to borrow a larger amount, say £7,000 instead of £6,500. Just make sure you don’t take on a debt that you cannot afford to repay.

 

The size of the loan will to some extent determine the term of the loan. It is, for example, difficult to pay off a £7,000 loan in just one year as the monthly payments would be relatively high. However, if you borrow only £1,000, a term of 12 months is more manageable.

You also have to consider the cost implications of the loan term as the longer the term, the lower the monthly payments – but the higher the total cost.

 

The interest rates on personal loans depend partly on the loan amount and term. But lenders also assess your creditworthiness, usually by looking at your credit file.

The lowest rates are reserved for the best customers – that is, borrowers with a spotless credit record. If you are judged likely to default on the loan because of a poor credit history, you will be charged a higher rate of interest or your application will be turned down.

In other words, there is no guarantee that you will qualify for the advertised rates. Lenders are allowed to boast of low representative rates if those rates are charged to 51% of successful applicants, which means almost half could be charged a higher rate.

You can pay off your debt before the end of the loan term if you come into some cash. But watch out for early repayment fees. Many lenders levy a penalty for early repayment, which could wipe out any potential interest savings. Some lenders also charge arrangement fees for personal loans, which you should factor into your cost calculations.

You should try to work out how much you can afford to borrow and pay back before applying for a loan. This way you can look for loans in your borrowing range, giving yourself the best chance of being accepted as well as ensuring you don’t take on a loan that you can’t afford – you could even try MoneySuperMarket’s loan calculator for guidance.

Likewise it’s better to avoid taking out a loan without thinking carefully whether you need it, and whether the cost of the loan is worth what you’re taking it out for. For example, it’s probably not a good idea to take a loan out for everyday purchases – a credit card might be more suitable.

Interest free periods can be useful when you’re borrowing, but you should always keep an eye on how long this will last. Once the interest free period ends you may be moved on to a high rate instead, so it can be a good idea to pay off as much of your debt as you can during this interest free period.

Variable rate deals mean the interest rate at which you make repayments can change whenever the lender decides to change it – though often lenders will use the Bank of England base rate as a guideline. While this means that your repayments could be less if the base rate falls, they could also go up if the rate rises, so it could be a good idea to ensure you’ll be able to cope with interest rate fluctuations before taking out a variable rate loan.

Loan sharks should always be avoided – they’re illegal, not regulated by any financial organisations, and they generally charge massively high interest rates. What’s more, if you aren’t able to repay them you may be pressured into borrowing even more money, which could lead to a spiral of debt.

Payday loans may be legitimate, but they can come with incredibly high interest rates sometimes reaching over 1000% - which could make even a small loan turn into a debt spiral. Learn more with our guide to payday loans.

Every loan application you make, just like credit applications, leave a mark on your credit report. Too many of these will give lenders the impression that you are desperate to take out a loan, which could imply that you’re struggling to manage your finances – as a result, lenders may be more reluctant to let you borrow from them in the future.

Rather than making lots of applications and hoping one will stick, you may be better off running a soft check on your credit score to see what kinds of loans you’ll be eligible for. This way you can minimise your applications and reduce the chance of you damaging your credit.

Often with loans, the more you borrow the less interest you’ll end up paying. It can vary by lenders, but you should always check on the interest rate they charge as there might be a chance you actually pay less overall by choosing a bigger loan with a lower interest rate.

The best way to find the right deal on a loan is to shop around, and by comparing deals on MoneySuperMarket you’ll be able to browse a list tailored specifically for you. All you need to do is answer a few questions about the loan you need and you’ll be able to compare loans from a number of different providers by the rate you’ll pay back at as well as how likely you are to be accepted.

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So how do we make our money? In a nutshell, when you use us to buy a product, we get a reward from the company you’re buying from.

But you might have other questions. Do we provide access to all the companies operating in a given market? Do we have commercial relationships or ownership ties that might make us feature one company above another?

We commit to providing you with clear and informative answers on all points such as this, so we have gathered the relevant information on this page.