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Car finance vs personal loan: which actually saves you money?

Tue, 04 Aug 2026 15:22:32 GMT

Is it better to buy a car with a personal loan or car finance? Explore your options in our jargon-free guide.

Borrowing money for a new or used car is a big decision – up there with getting a mortgage, moving house or building a home extension.

Why? Well, the sums involved are often big and involve committing yourself to repayments in a changing economy – and possibly in changing personal circumstances.

It's no surprise, then, that people want to get it right. In practice, this usually means choosing between:

A car finance agreement from a dealer or car finance broker
A personal loan from a bank or online finance provider

The big question: which of these two types of credit is best for you? As so often in the world of finance, there's no one-size-fits-all answer.

Whether you go for car finance or a personal loan depends on a range of factors, including:

The kind of car you want
How important it is that you own the car
Your financial forecast
Your credit score

In this article, we explore car finance and personal loans so you can understand the issues better and make the right decision for you.

So, first of all, what do we mean by "car finance"?

What is car finance?

Car finance involves borrowing money from a car dealership or car finance broker to buy a car. The car can be either new or second-hand.

As with all kinds of loans, interest is added to your repayments. So, if you get loaned £1,000, say, you'll be paying that £1,000 back with extra on top for the lender.

There are three main kinds of car finance agreements:

Hire purchase (HP)
Personal contract purchase (PCP)
Car leasing

HP involves hiring a car, then buying it once you've paid off the loan. PCP is similar, but at the end of the agreement you can choose between buying the car and handing it back.

Car leasing, meanwhile, involves renting the car for an agreed period and paying back a fixed amount each month. At the end of the agreement, the car gets handed back.

How is a bank loan different from car finance?

A car finance agreement involves borrowing money from a car dealer or car finance broker. A bank loan – also known as a "personal loan" – is borrowed from a bank or online finance provider.

As with car finance, a bank loan is split into monthly repayments with interest added. Unlike car finance, a bank loan isn't specifically for a car. It's a personal loan that can be spent on anything for personal use.

With car finance, you're given the car and you pay it back. With a bank loan, money gets put in your account and you buy a car with it.

The amount of money you can borrow and the level of interest on your repayments depends on two things:

Your income (current and forecast)
Your credit score

Which is right for me?

There are various factors informing your choice between car finance and a personal loan. One of the most important is your credit score.

People's credit scores vary for all sorts of reasons. If you have a strong credit score, a personal loan may be cheaper overall.

However, if you have a low or middling credit score, car finance could be for you. Banks are unlikely to lend you the money but there are specialist car finance brokers like us who will.

Other things to consider include:

Mileage limits: personal loans are limitless whereas car finance agreements tend to be restricted.
Vehicle ownership: with a personal loan, you own the vehicle from day one. With a car finance agreement, the car isn't yours until the last repayment has been made.
Flexibility: PCP car finance deals are flexible and allow you to change car every few years.

What are the advantages of car finance?

In our view, there are three main advantages of car finance agreements:

They're flexible
They're convenient
They're good for your credit score in more ways than one

1. Flexibility

A car finance broker or car dealer will offer you a range of car finance options. You're then in a position to choose the best one for your circumstances.

PCP and HP agreements are flexible because they let you hand back the car before the deal is completed. This hinges, however, on you making an agreed-upon number of repayments.

2. Convenience

Personal loans have to be arranged yourself, whereas a car dealer or car finance broker will sort out the finance agreement for you.

3. Credit score

Perhaps most important of all is the question of credit scores.

Your credit score determines how reliable you look to lenders and can affect your ability to borrow in the future.

A car finance agreement can be good for your credit score in two ways. First, making all your repayments on time can improve your credit score, making borrowing easier down the line.

Secondly, you're unlikely to get a personal loan if you have a poor credit score. There are, however, car finance providers like us that specialise in working with people with poor credit.

Which is cheaper?

The overall cost of a personal loan or car finance agreement will depend on a range of factors, from the type of car you want to your current financial situation. This makes it difficult to say which is cheaper without taking a close look at your finances.

Your best bet is to explore the pros and cons of each kind of arrangement, factor in all the costs and then look for the best deal for you.

If, however, you've got poor credit, then car finance is often the best option.

Are you looking for bad credit car finance in Newcastle upon Tyne ? Zoomo is an RAC Approved dealership with a 98% finance acceptance rate. It's quick and easy to apply for finance online .

How long does a CCJ stay on your credit file?

Tue, 04 Aug 2026 15:22:30 GMT

County court judgments (CCJs) affect credit scores. Find out how long they stay on your file in our jargon-free guide.

If you're over 18 and have used or applied for a financial product or service, you'll have a credit file, also known as a "credit report".

These files record your borrowing history and financial behaviour. They're created and managed by credit reference agencies (CRAs). In the UK, the main CRAs are Experian, Equifax and TransUnion.

When you apply for finance, whether for a car, house or any other big purchase, lenders will look at your credit file. This will affect their decision to lend the money you ask for.

Different things can affect your credit file. These include your payment history and the amount of debt you have.

Less common but no less important is a CCJ. If you've been issued a CCJ, it will negatively affect your credit file and stay there for six years.

This can make it more difficult for you to get a loan or finance. But it doesn't make it impossible, especially if you work with a bad credit car finance specialist like us.

What is a CCJ?

A CCJ is a county court judgment. This is a court order issued by the civil court in England, Wales or Northern Ireland. It formally confirms that you owe money to a creditor and sets out a deadline or repayment plan.

In Scotland, the court order is called a "decree" and is issued by the Sheriff Court.

How does a CCJ work?

Let's say you owe money to a bank, landlord or utility company. They will send you a letter of claim telling you what you owe.

Whenever possible, you should pay the full amount or come to a repayment agreement. If you can't, the creditor may take court action against you. If this happens, the court will issue a CCJ by post.

How long does it stay on your credit file?

The CCJ will stay on your credit file for six years unless you pay the full amount within one month.

Once paid, you need to write to the court to say you've paid, including proof of payment from the creditor.

If you pay after one month, the CCJ will be marked as "satisfied". Lenders will still see this on your credit file, but they'll also see that you've paid.

What should I do if I receive a CCJ?

As with most debts, the most important thing with a CCJ is not to ignore it. If you do, you could be taken to court and forced to pay the money back.

What you should do when you receive a CCJ depends on whether you actually owe the money or not. If you don't, you can apply for the judgment to be cancelled.

If you do owe the money, you'll need to pay it back in the way specified by the CCJ. This will tell you:

How much you owe
Whether you need to pay it in full or in instalments
When you need to pay it by

If you can't pay back the money, you can ask to:

Change the terms of the CCJ
Pay it back in instalments
Pay it back in different instalments to those specified in the document

For more detailed information about what to do if you receive a CCJ, take a look at the government website .

Can you get car finance with a CCJ?

Receiving a CCJ doesn't stop you from getting car finance. It does mean, however, that your options will be more limited than they would be for someone without a CCJ on their credit file.

Unfortunately, mainstream lenders are likely to see you as a high-risk borrower and refuse a loan or finance agreement. Specialist bad credit lenders, however, will look at other factors such as your income stability and current financial situation.

The passing of time helps. A CCJ issued a year or more ago looks less bad to lenders than one issued within the last year.

Even if you miss the initial deadline, a paid ("satisfied") CCJ shows lenders that you've taken steps to clear your debts.

You can also improve your chances of getting car finance with a CCJ by providing a larger deposit. That's because a larger deposit means the bank has to lend you less money, thereby reducing the risk they're taking.

But perhaps the best thing you can do is approach a specialist broker – one that, like us, focuses on providing finance to people with bad credit.

What else can affect your credit file?

Your credit file will mainly be affected by:

Your payment history
The amount of debt you owe
How often you apply for new credit

All these details are considered by lenders when you ask them for a loan.

How can you improve your credit file?

Your credit file is a living document. Your present and future financial behaviour are just as important as your past.

This means you can improve your credit file in several ways. You can pay in full and on time. You can reduce your reliance on credit cards. And lenders will often look more favourably on people who have stayed at the same address for a long time.

You can also register on the electoral roll. This validates your identity and your address and has a positive effect on your credit score.

How we can help

If you have a CCJ or other negative marks on your credit file and are looking for car finance in Newcastle upon Tyne , we can help. We believe that bad credit shouldn't stop you from getting the car you need for work, family or personal use.

As an RAC Approved Dealer that adheres to the AA Cars Standard, we can promise a high-quality range of used cars.

We've helped thousands of people with bad credit in Newcastle and nearby get car finance. Could we help you, too? It's quick and easy to apply for finance online .

Can you get car finance after being declared bankrupt?

Tue, 04 Aug 2026 15:22:27 GMT

Being declared bankrupt can come with many challenges. But does it mean you can't get car finance? The truth may surprise you…

When applying for car finance, lenders look at your reliability as a borrower. When weighing this up, they look at lots of things – from your current income to your credit report.

Financial difficulties can impact your ability to get car finance. But in most cases, adverse credit shouldn't be a barrier to getting the car you need – whether you need it for work, family or leisure time.

In the case of bankruptcy, you can get car finance after being declared bankrupt – but typically only once you've been discharged. This "discharge" usually takes place 12 months after the initial declaration.

Your credit score will be affected for up to six years – something that will likely make mainstream lenders look the other way.

It doesn't mean, however, that you can't get car finance. It just means that you have to:

Take steps to improve your credit score
Work with a broker like us that specialises in bad credit car finance

Can you get car finance while bankrupt?

It's very difficult to get car finance while still bankrupt. This is because lenders can't be sure you'll be able to make repayments and so view you as a risky proposition.

Once discharged, however, you're in a much better position to apply. This is because lenders – especially those that specialise in bad credit car finance – look at your current affordability as well as your financial history.

Can you get car finance once you're discharged?

Once you've been discharged from bankruptcy – usually after 12 months – you can apply for car finance. Your best bet is to work with specialist bad credit car finance providers or even lenders that specialise in bankruptcy cases.

The 12-month period applies because after this time, you're considered a "discharged bankrupt". This makes you a more favourable borrower to lenders. It also gives you a chance to get back in the saddle financially before taking on car finance repayments.

Once you've been discharged, you don't need to disclose your bankruptcy to a lender. However, it's important to tell the truth if asked directly.

How long does bankruptcy stay on your credit report?

Most of the time, bankruptcy stays on your credit report for up to six years. After this, the record of bankruptcy is removed from your file.

If, however, you breach the terms of your Bankruptcy Order, bankruptcy can stay on your credit report for up to 15 years. This can happen if you exceed borrowing limits.

How can you improve your chances of getting car finance after being declared bankrupt?

Your credit file isn't a static document. It changes according to your current and future spending and borrowing.

This means you can take concrete steps to improve your credit score and, by extension, your chances of getting car finance.

The three main ways to do this are:

Registering with the electoral roll
Paying on time whenever possible
Limiting the number of hard searches on your credit report

Working with a car finance broker can help by carrying out soft searches on your behalf. These are invisible to lenders, so they don't affect your credit report in the same way that a hard search (formal application) will.

What is a guarantor loan?

A guarantor is someone (typically a friend or family member) who promises to repay a loan if the primary borrower can't pay it back.

This is a big responsibility for the guarantor. A guarantor can, however, increase your chances of getting car finance after being declared bankrupt.

Can I keep my car after being declared bankrupt?

This depends on several factors, including:

The value of the car
Whether you own it outright
Your need for it

If it's an essential vehicle, whether for work, childcare, medical reasons or a disability, you may be able to keep it. The same could apply if it's a low-value vehicle.

If, however, the car is deemed a luxury or has a high value, it can be seized and sold to repay creditors.

In some car finance agreements, clauses may apply allowing lenders to repossess the car in the event of bankruptcy. This can happen even if your payments are up to date. Whether this applies to you or not will be detailed in your finance agreement.

What is bankruptcy?

Bankruptcy is a legal process. If a person or business can't pay their debts, they're declared bankrupt. Non-cash items (assets) are converted into cash (liquidated).

Remaining debts are cancelled to give the bankrupt person or business a fresh start.

If you can't pay your debts, you can apply for a bankruptcy order. This generally involves paying an application fee.

An official receiver or trustee will then take control of your money, properties and valuable possessions. These are sold off to pay the people you owe money to.

In day-to-day speech, "bankrupt" means you have no money. In truth, however, people who have been declared bankrupt are allowed to keep:

Essential items for day-to-day life
Enough money from their income to cover living costs

Any surplus, however, can be taken to pay their debts for up to three years.

What is bad credit car finance?

Bad credit car finance is a special kind of loan for people with poor credit scores. This could be because of late payments, defaults, CCJs, low credit history or bankruptcy.

Bad credit car finance brokers provide loans to people who would be rejected by mainstream lenders.

How we can help

Here at Zoomo, we help people with bad credit to buy cars on finance. We provide a fast – and non-judgmental – service, working with our network of lenders to find suitable packages for drivers in Newcastle upon Tyne.

Do you live in the North East and are looking for bad credit car finance? Explore our fleet of used cars for sale in Newcastle to get started.

Buying your first car on finance: the honest guide

Tue, 04 Aug 2026 15:22:25 GMT

Are you planning to buy your first car on finance? Learn about your finance options, budget considerations and who to buy from.

Buying your first car is a big deal – and often an exciting one too.

Yet with the excitement can come a gnawing sense of anxiety. You may worry that you're not getting the best bang for your buck. And you may feel overwhelmed by the plethora of car finance options available.

Here at Zoomo, we keep things simple. We believe in laying out the options clearly and simply and pointing customers in the right direction.

And that applies even if your credit score is less than glowing. We work with specialist lenders to make sure that your financial history won't determine your driving future.

So, if you need a guiding hand through the world of car finance, read on. We hope it helps you get behind the wheel of your first automobile.

PCP or HP?

There are two main types of car finance: PCP and HP. Let's break down both options.

Personal contract purchase (PCP)

PCP car finance involves paying a deposit up front and then paying monthly instalments for an agreed period.

At the end of that period, you have a choice. You can either make a large "balloon" payment and own the car or hand the car back to the dealer.

PCP is a popular choice and it's often the first suggestion of car dealers. There is, however, another option: HP or hire purchase.

Hire purchase (HP)

HP agreements begin in the same way as PCP agreements. You pay a deposit followed by monthly instalments. However, instead of buying the car with a final balloon payment, you own the car automatically at the end of the finance period.

Naturally, this means monthly payments are higher with an HP agreement than with a PCP. The advantage is that you know you'll have the car at the end of the contract.

Which should I choose: PCP or HP?

The choice between PCP and HP depends on a few factors. At the end of the day, it depends on your unique requirements and financial situation.

You might want to…

Choose PCP: if you want lower monthly payments and flexibility at the end of the contract.
Choose HP: if you're in a position to pay higher monthly payments with lower interest and you definitely want the car at the end of the agreement.

The importance of budget

Now that you've chosen your car finance type, you'll need to give some serious thought to your budget. Without a clear budget, you're likely to end up with a car you can't afford.

1. Make sure you have cash for a deposit

First, you must have access to ready cash for the deposit. This is typically 10% of the car's total value.

2. Be sure you can afford the monthly payments

Secondly, you'll need to look ahead and figure out what you can afford each month.

If you're taking out a car finance agreement, monthly payments are inevitable. The good news is that most agreements have fixed monthly instalments. This means you don't have to plan for nasty price hikes.

3. Plan for ongoing costs

Thirdly, you should plan for running costs and maintenance costs. These can include car insurance, fuel, annual MOTs, maintenance, servicing and even clean air charges.

4. Stick to the mileage limit

Finally, you should consider your probable annual mileage. This is because PCP agreements and car lease agreements tend to come with a mileage limit. You'll be penalised for going over the limit, so make sure you have a rough idea of how much you'll drive the car.

Keeping these things in mind boosts your chances of getting a car within your budget and not running into financial difficulties down the line. If in doubt, ask your dealer for guidance.

An experienced and professional dealer will be happy to talk you through your options.

Who should I buy my first car from?

You have two main options when buying a car. You can buy from a private seller or you can buy from a car dealership.

You can sometimes find good deals with private sellers, but there's always the risk of getting scammed and it can be hard to get a refund.

Buying from a dealership is a much safer bet. When buying from a dealer, here are some questions to ask before you pay:

How much is the deposit?
How much are the monthly payments?
How much is the final balloon payment? (In the case of a PCP agreement)
How much interest will I pay?
How long is the contract?
What's the mileage limit?
What rules are there around wear and tear?
Are maintenance and servicing included in the deal?

Asking these questions before committing to a purchase dramatically increases your chances of getting a car on finance that's right for you.

What if I've got bad credit?

People have bad credit scores for all sorts of reasons. And while mainstream lenders are likely to give your application a swerve, specialist brokers like us are happy to help.

The fact is that you'll need to pass a credit check to get a car on finance. If your application is turned down, it will be marked on your credit report. This is one of the main reasons why you should work with a specialist broker if you know you have bad credit.

It's also worth noting that applications for credit count as hard searches. This means they stay on your credit file for six years and affect your credit applications in future.

To carry out soft searches that don't make a mark, you should work with a car finance broker that will carry out eligibility checks on your behalf.

You may also be offered a guarantor loan. This means someone else agrees to pay back the loan if you become unable to. This person is known as the "guarantor".

We hope this guide helps you take the first steps to buying your first car on finance.

And if you're looking for bad credit car finance in Newcastle , we can help. Learn more about how finance works or apply online today – it only takes a few minutes.

IVA and car finance: your honest options explained

Tue, 04 Aug 2026 15:22:23 GMT

Are you looking for car finance with a current or completed IVA? Learn how the process works and explore your options.

If you owe debts to more than two creditors, you may have an individual voluntary arrangement (IVA). This limits how much you can spend on food, clothing and leisure while you pay off an agreed amount of money.

It doesn't mean, however, that you can't apply for car finance. Yes, there are steps you have to take that people without an IVA don't have to. But there's no reason why you should have an IVA and not buy a used or new car on finance.

Here at Zoomo, we specialise in car finance for people with bad credit. So, if you're in the situation we've described, get in touch . We'll be more than happy to talk you through your options.

What is an IVA?

An IVA is an individual voluntary arrangement. It's a legally binding agreement between you and your creditors (the people or organisations you owe money to).

You pay back all or part of your debts over a set period to an insolvency practitioner (IP). The IP then divides the money among your creditors.

An IVA typically lasts four years. Once the last payment is made, any remaining unsecured debt you haven't paid off is written off.

Can you get car finance while in an IVA?

Having an IVA doesn't stop you from getting car finance. It does mean, however, that you have to clear some hurdles.

First, you must get written permission from your IP or supervisor. This is because most IVAs have a clause stopping you from taking on new credit over a threshold without permission – typically a threshold of £500.

To get written consent, you also have to demonstrate that the car is essential and that the monthly payments fit within your agreed IVA budget.

Secondly, you'll need to apply to specialist lenders. Most lenders will decline applicants with an active IVA, seeing them as too much of a financial risk.

However, bad credit brokers (like us) will look at your recent financial behaviour, not just your credit score. This means you stand a far better chance of getting car finance even with an outstanding IVA.

Finally, you need to choose the right type of car finance agreement.

Hire purchase (HP) is usually the most realistic option. That's because it provides fixed monthly payments without a large balloon payment at the end of the agreement.

When applying for car finance with an IVA, it's important to carry out soft credit searches. This means using an eligibility checker rather than applying directly for finance. A car finance broker can also do this for you.

This is important because soft searches aren't marked on your credit score whereas recent hard searches can make lenders think you're less creditworthy.

Can you get car finance after your IVA is completed?

Once your IVA is completed, it becomes easier to get car finance. That's because finance brokers and lenders will look more closely at your current money management than your completed IVA.

You'll be removed from the Individual Insolvency Register three months after your IVA ends. However, the arrangement will remain on your credit file for six years from its start date.

When applying for car finance, you should take the same approach as when you have an active IVA. Hard searches hurt your credit score, so make sure you use soft-search eligibility checkers – or get a car finance broker to use them for you.

What are the different types of car finance?

There are four main ways to finance a car.

1. Personal loan

This is where you borrow money from the bank or other lender and use it to buy a car from a dealer.

Under this arrangement, you own the car from day one and make set repayments (with interest) to the lender.

2. Personal contract purchase (PCP)

This is where you pay an upfront deposit followed by fixed monthly payments.

At the end of the agreement, you hand the car back and either start a new deal or pay a large "balloon" payment to own the car.

3. Personal contract hire (PCH)

This is essentially a long-term rental agreement, where you pay fixed monthly payments but never get to own the car. At the end of the agreement, you hand the car back to the rental company.

4. Hire purchase (HP)

This is where you pay a deposit followed by fixed monthly repayments. These cover the entire value of the car with interest. After the final payment – and a nominal option-to-purchase fee – you own the car outright.

What's the best kind of car finance if you have an IVA?

In practice, the most realistic kind of car finance when you have an IVA (or have recently completed one) is an HP agreement. Unlike a PCP arrangement, there's no balloon payment waiting at the end of the agreement.

In this situation, your HP agreement this will need to be arranged through a specialist bad credit car finance broker like us.

What car can I get with an IVA?

There isn't a fixed amount of car finance you can get with an active IVA. The limit is typically determined by:

Your disposable income after IVA payments and living costs
The lender's affordability assessment

And as with any borrowing under an IVA, you'll need written permission from your IP if you're looking to borrow more than £500.

In practice, people with IVAs can typically get older used cars worth £4,000 to £10,000. This amount can increase if your income is strong, the IVA is running successfully and affordability is clear.

Based in Newcastle upon Tyne, Zoomo helps people secure car finance, no matter their credit history. Check your finance eligibility today or apply online – it only takes a few minutes.

zoomo

Car finance vs personal loan: which actually saves you money?

Is it better to buy a car with a personal loan or car finance? Explore your options in our jargon-free guide.

﻿

What is car finance?

How is a bank loan different from car finance?

Which is right for me?

What are the advantages of car finance?

1. Flexibility

2. Convenience

3. Credit score

Which is cheaper?

How long does a CCJ stay on your credit file?

County court judgments (CCJs) affect credit scores. Find out how long they stay on your file in our jargon-free guide.

﻿

What is a CCJ?

How does a CCJ work?

How long does it stay on your credit file?

What should I do if I receive a CCJ?

Can you get car finance with a CCJ?

What else can affect your credit file?

How can you improve your credit file?

How we can help

Can you get car finance after being declared bankrupt?

Being declared bankrupt can come with many challenges. But does it mean you can't get car finance? The truth may surprise you…

﻿

Can you get car finance while bankrupt?

Can you get car finance once you're discharged?

How long does bankruptcy stay on your credit report?

How can you improve your chances of getting car finance after being declared bankrupt?

What is a guarantor loan?

Can I keep my car after being declared bankrupt?

What is bankruptcy?

What is bad credit car finance?

How we can help

Buying your first car on finance: the honest guide

Are you planning to buy your first car on finance? Learn about your finance options, budget considerations and who to buy from.

﻿

PCP or HP?

Personal contract purchase (PCP)

Hire purchase (HP)

Which should I choose: PCP or HP?

The importance of budget

1. Make sure you have cash for a deposit

2. Be sure you can afford the monthly payments

3. Plan for ongoing costs

4. Stick to the mileage limit

Who should I buy my first car from?

What if I've got bad credit?

IVA and car finance: your honest options explained

Are you looking for car finance with a current or completed IVA? Learn how the process works and explore your options.

﻿

What is an IVA?

Can you get car finance while in an IVA?

Can you get car finance after your IVA is completed?

What are the different types of car finance?

1. Personal loan

2. Personal contract purchase (PCP)

3. Personal contract hire (PCH)

4. Hire purchase (HP)

What's the best kind of car finance if you have an IVA?

What car can I get with an IVA?