Car Finance Glossary

APR stands for Annual Percentage Rate. This is the annual interest rate that you will pay on your car finance loan. It includes both the interest rate and any fees that you will be charged over the course of the loan.

A balloon payment is a large lump sum that is due at the end of a car finance agreement. This is often used in PCP finance agreements and is sometimes referred to as a final payment.

A CCJ is a court order that can be issued against you if you fail to repay a debt. This can have a negative impact on your credit score and make it more difficult to obtain car finance in the future.

Your credit score is a numerical rating that is used by lenders to assess your creditworthiness. It takes into account your credit history, including any missed payments or defaults, and is used to determine the interest rate that you will be offered on your car finance loan.

A guarantor loan is a type of loan where someone else agrees to guarantee the loan repayments if you are unable to make them. This can be helpful if you have a poor credit score and are struggling to obtain car finance.

HP finance stands for Hire Purchase Finance. This is a type of car finance where you make fixed monthly payments over a period of time and then own the car outright at the end of the agreement.

A hard credit check is when a lender checks your credit score and credit history in detail. This can have a negative impact on your credit score and should only be done when you are serious about obtaining car finance.

Individual Voluntary Agreement: An IVA is a type of debt management plan that can be used if you are struggling to repay your debts. It can help you avoid bankruptcy and make more manageable payments.

PCP finance stands for Personal Contract Purchase finance. This is a type of car finance where you make fixed monthly payments over a period of time, but at the end of the agreement, you have the option to either return the car or pay a final balloon payment to own the car outright.

The rate of interest is the percentage that you will be charged on your car finance loan. It is based on your credit score and the length of the loan.

A representative example is a typical example of what you can expect to pay for car finance. It includes the interest rate, any fees, and the total amount that you will repay over the course of the loan.

A soft credit check is a less detailed check of your credit history. It does not have a negative impact on your credit score and is often used for car finance pre-approval.