The Daily Telegraph - Your Money - - Motor Insurance And Finance - Per­sonal con­tract plans Hire Pur­chase Se­cured loans

(PCPs) Most mo­tor deal­ers of­fer PCPs, but they will have their own brand name – such as Op­tions for Ford. Th­ese plans al­low you to pay a de­posit for the car, and the car dealer will give you a guar­an­teed fu­ture value for the car at a given date – usu­ally two or three years af­ter pur­chase, ac­cord­ing to the miles you ex­pect to drive. The amount you pay in­ter­est on is the ‘bit in the mid­dle’ that you are bor­row­ing – if the car costs £10,000, and you pay a £2,000 de­posit, if the GFV is £3,000, then you pay in­ter­est on £5,000. You can buy the car by pay­ing the GFV at the end, hand the keys back, or use any money the garage of­fers you above the GFV to carry on with an­other car on the scheme. Th­ese of­ten have in­cen­tives such as free break­down cover or in­sur­ance. You would not have to get an MOT for the car as you could swap it be­fore this was nec­es­sary. This scheme al­lows you to take a fi­nance deal with the garage, with or with­out a de­posit paid for the car de­pend­ing on the deal on of­fer, and you pay off the loan over a set pe­riod. At the end of the term, you will own the car out­right with­out the need to pay a bal­loon pay­ment. Un­se­cured loan from banks and build­ing so­ci­eties can be sig­nif­i­cantly cheaper than the mo­tor fi­nance on of­fer, and you can choose the term of re­pay­ment de­pend­ing on your needs. If you have a mort­gage al­ready, the cheap­est way to bor­row more would be to add the loan amount to your mort­gage. This will of­ten give you ac­cess to fi­nance at a lower cost than an un­se­cured loan, but de­fault­ing could put your house at risk. Also, if you make pay­ments for the whole of the mort­gage term on the ex­tra bor­row­ing, it could prove to be very ex­pen­sive in the long run.

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