Wrong car loan could cause debt problems

A money information website has urged people to shop around for car finance.

Moneyfacts has said those looking for new 58 plate vehicles – available from next week – have a number of loans with varying rates of interest to choose from.

The advice could also benefit people who want a loan to buy and older car or for other reasons but are worried about debt management.

Forecourt finance may be convenient, the site said, but other lenders can offer a competitive rate on unsecured loans. Furthermore, looking for deals on internet and over the phone could save more money.

For example, the research found car buyers who choose the worst loan deal on the market could be paying £2,400 more for a £10,000 loan than the cheapest deal on the market.

Moneyfacts also recommends borrowers find out the exact rate offered as personal credit ranking may affect rates.

This tip could be useful for anyone talking out an unsecured deal, for example, a debt consolidation loan.

In addition, the Association of British Insurance has recommended shopping around for insurance to save money.

By Morwenna Kearns