What is Negative Equity Car Finance?
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/
What is negative equity finance?
Despite it being a little trickier to get car finance with negative equity on your current car, it’s still possible. Negative equity car finance deals are designed to help you pay for a new car, while repaying additional costs from your previous finance agreement – all in one easy monthly payment.
This means your car outgoings will be one place, making it easier for your budget each month.
Ways to avoid this from happening
In our experience, the best way to deal with negative equity is to prevent it in the first place. If you want to make sure you don’t have additional costs at the end of your contract, here are some things you can do:
- Put down a bigger deposit – get a head start with the largest down payment you can afford
- Make higher monthly payments – if you want to own the car, Hire Purchase (HP) could help you pay off the loan quicker (but it will cost you more per month)
- Choose the right car – some cars depreciate faster than others, so try to pick one that holds it value
How to get out of negative equity on my car
While there are steps you can take to prevent negative equity, we know that it’s not always avoidable. Here’s how to get out of negative equity with your existing contract:
- 1.
Pay off what you owe If you have the money to do so, paying off the outstanding finance will put you in a very good position to find your next car finance deal.
- 2.
Request a voluntary termination If you’ve already paid at least half of your finance agreement, you could end the agreement early and walk away. This is one of the potential negative equity alternatives, ensuring you get out before incurring the extra cost.
- 3.
Find a negative equity car finance deal There are a number of negative equity car finance options available, meaning you can let the costs roll over to your next contract.
Getting car finance with negative equity
If you’re in negative equity with your car, don’t worry too much. It’s still possible to get car finance with negative equity from your previous agreement, as long as you can afford to let the equity roll over.
Negative equity car finance doesn’t have to be complicated either, as lenders will consolidate everything into one easy payment. But just be aware that you will be charged an extra amount to cover the negative equity. That’s why we recommend choosing a much cheaper car than your last one to ensure you end up paying less overall.
Negative equity tends to be less of a problem with Hire Purchase agreements. Find out more here.
