Car refinancing: What does it mean and how does it work?
Car refinancing is when somebody with a current vehicle finance agreement takes out a new agreement to pay the remaining balance on the existing loan.
If you refinance your car, your existing finance agreement will be settled in a single transaction. This settlement amount may be covered by your new lender, or be calculated in to your new finance agreement.
Zap Loans are a credit broker not a lender. Representative example: borrowing £10,000 over 5 years with a representative APR of 19.1%, an annual interest rate of 19.1% (Fixed) and a deposit of £0.00, the amount payable would be £255.50 per month, with a total cost of credit of £5,329.80 and a total amount payable of £15,329.80
Terms and Conditions:
This example is for a Hire Purchase Agreement.
I confirm that I have read and understand the following, and that in doing so provide permission for ZAP Loans to undertake a credit search and provide my information to their panel of lenders. I understand that this may register as a credit search against my name.
- I have read the Initial disclosure document (IDD) available online
- I consent to a credit search being conducted
- I understand the following
- The credit search relates to a hire purchase product which does not have any mileage restrictions; however, a balloon product is also available – please call to discuss
- Subject to balance financed, the agreement would be protected by the Consumer Credit Act (CCA)
- I tend to be the registered keeper of the vehicle and would hold fully comprehensive motor insurance during the length of the agreement
- I understand that the vehicle is at risk of repossession if the contractual repayments are not maintained
By proceeding to obtain a quote, you confirm that you have independently chosen the appropriate term of agreement , are comfortable with the suggested repayments and agree to the above statements. Copies of the relevant documentation, to include the IDD, Product Explanations and Overview have been provided to your email address in a durable medium
To view our IDD (Initial Disclosure Document) – please visit https://zaploans.co.uk/initial-disclosure-document-idd/
Why do people choose to refinance their car?
Situations and circumstances change. When you took out your original agreement, it probably suited your lifestyle and disposable income amount. You may have had a promotion at work and be able to pay more per month towards you car, or you may have just moved house and want to cut your payments.
Changes in your credit score, income, or monthly spending could mean that you are able to finance a better car, or be accepted for a better rate. You may have finished your Personal Contract Purchase (PCP) agreement, and want to refinance your balloon payment.
Often people take out a joint finance agreement, but now wish to have a loan that is just in their name.
There are many reasons to refinance your car.
The most popular reason why people refinance a car is to get a better deal. Refinancing your car loan could mean that you lower your monthly payments, get a lower APR, or both! You could also get a better car for your money.
It can be really straightforward to swap to a loan with cheaper monthly repayments, but of course, every situation is different. That’s why it’s important to speak a specialist in refinancing.
You may have taken out a Personal Contract Purchase (PCP) finance agreement, in which you are require to pay a balloon payment in order to keep your vehicle. Rather than paying your balloon payment in one lump sum, you can finance the remaining amount and pay it off monthly.
Remember though, sometimes paying off your balloon payment over a longer term can mean spending more in the long run. This is why some people opt to refinance a new car, paying off the balloon payment at the same time.
You can find out more about refinancing your balloon payment further down the page.
Over the last few years, APR rates on vehicles have changed massively. You may have taken out your agreement when rates were high, and want a new deal to reflect the current APR rates. You may also be offered a better rate deal if your credit score has improved.
By lowering your rate of interest, you could be able to have cheaper or fewer monthly loan repayments.
How does refinancing a balloon payment work?
If you are coming to the close of your PCP agreement, you can choose to keep your vehicle by paying a one-off balloon payment, or you can opt to give the car back. Alternatively, you may want to pay the balloon payment, and use the value of the vehicle as a deposit for a new car.
Refinancing allows you to take out a loan to spread the costs of your optional final payment. Balloon payments can often be large, and unmanageable in one chunk, which is why refinancing your vehicle can be a useful option.
Zap Loans are an expert in refinancing and balloon payments and also have experts on hand 7 days per week. If you want to find out more about refinancing your balloon payment at the end of your PCP agreement, please don’t hesitate to get in touch.
Can you refinance a car with bad credit?
Yes, you can. Everyone’s circumstances are different, but here at Zap we have a large panel of lenders who cater for all types of customer types, including those with bad credit. We believe that just because your credit score has been negative in the past, it shouldn’t mean you are unable to get a car finance loan.
Negative equity can also hold some people back from refinancing their vehicle. If your car has lost value quicker than you expected it to, you can often owe more than the car is worth.
We think it’s really important to have an expert who you can talk to. We understand that some people need more help when refinancing a car than others. If you want specific & tailored car finance advice based on your circumstances, get in touch with Zap today.
So, how do you refinance a car?
Whatever your reasons for refinancing may be, whether it’s to get a better finance rate, lower your car finance monthly payments, or because your credit score has improved, the process remains the same. Simply apply for a loan today. If you are approved in principle, a member of the Zap team will put you in touch with your personal account manager who will give you a call to discuss your options. No-obligation, no lengthy forms.
We are on hand to answer any questions you may have. We can be there for you as much, or as little as necessary.
Why choose Zap for car finance?
At Zap, we care.
Our service is focused on tailored and personal help, and we understand that no 2 sets of circumstances are the same. The possibilities remain unlimited, with our wide range of loan types, vehicle types, and even car sourcing. We know that it can be difficult to maintain a high credit score and we know that many finance brokers make it difficult – we want to change that.
As much, or as little
While our service aims to be personal and tailored to you, we also understand that your time is valuable. That’s why we let you choose how much support you need. You may be a pro at this and want to do everything online and that’s fine with us. Or, you may have been rejected for car finance a few times and want a little more guidance – also fine!
Dedicated account manager
From day 1 you will be allocated a personal dedicated account manager who will review your case and show you through the process. Let us deal with any unnecessary stress, so that you don’t have to
The best deal
Our varied panel of lenders mean that you have a higher chance of being accepted for finance. It also means that we have more rates available. With rates from as low as 7.9% and UK exclusive lenders, we are well equipped to find you the best deal.
