Best Car Finance Options for Bad Credit Applicants: HP, PCP, or Personal Loans?

Although it is not easy to get a vehicle when credit history is less than perfect, there are suitable financing solutions. Past financial setbacks shouldn’t stand in the way of buyers getting necessary transportation, and many lenders acknowledge that. 

Applicants can then explore the best options of Hire Purchase (HP), Personal Contract Purchase (PCP) and personal loans, to see which is the most feasible route. 

However, to make that decision it is important to know the difference between PCP vs HP. This search is simplified, working with companies like CarMoney, which connect individuals with lenders who are willing to work with lower credit scores.

Hire Purchase (HP): A Path to Ownership

HP remains one of the most accessible financing methods for those with lower credit scores.

How It Works

• A deposit secures the vehicle, reducing the borrowed amount.
• Fixed monthly payments gradually cover the full cost.
• Once the last installment is paid, ownership is officially transferred.

Why HP Suits Bad Credit Applicants

The vehicle itself is the collateral, so lenders see HP as lower risk. You can get approval for a car loan, but if you miss payments, you may have your car repossessed. However, approval rates are higher than other finance products. 

There’s no balloon payment at the end, which means it is easier to budget.

Personal Contract Purchase (PCP): Lower Payments, More Flexibility

PCP offers an alternative financing structure that keeps monthly installments lower but requires a final lump sum for ownership.

How PCP Functions

• An upfront deposit secures the agreement.
• Monthly payments cover depreciation rather than total cost.
• At the end of the term, three options exist: return the car, make a final payment to own it, or trade it in for another model.

Can Bad Credit Applicants Get PCP?

Lenders are more likely to approve those with stellar credit scores, since they are less risky in deferring a large portion of the payment. But, with a big deposit or guarantor, chances increase.

Personal Loans: Maximum Flexibility, Stricter Approval Criteria

For individuals seeking complete control over their purchase, an unsecured personal loan provides a way to finance a vehicle without dealer-imposed conditions.

Loan Structure

• Borrowers receive a lump sum from a lender.
• Repayments follow a fixed schedule over an agreed term.
• The car belongs to the buyer from day one.

Why Personal Loans Can Be Difficult to Secure

Creditworthiness is assessed by looking at how someone behaved in the past. All applicants with lower scores may be hit by higher interest rates or may be rejected. While this method gives full ownership from the start, people with bad credit find getting good terms difficult.

PCP Vs HP: The Difference

The basic difference between PPC vs. HP comes at the end of the agreement. By the end of the HP deal, you are the owner of the car as you have paid the full value. 

Meaning, there is no mileage limit that you can cover, or any fees that you have to pay, if you damage the car. However, if you plan to buy a new car, you have to sell the existing one or trade it at a dealership.

PPC finance is a bit different. Here you have to pay only a certain portion of the vehicle’s value over the finance term. If you plan to own it by the end, there is a large amount that you have to pay which is known as the balloon payment.

Here is a table to make PCP vs HP for you.

How To Compare PCP Vs HP Finance Deals?

One of the common ways of financing is to talk about it directly with the dealer you are buying the car from. If you are offering a cash price, you can ask them about the financing options if that is what you prefer.

Various third-party companies are offering HP and PCP deals. Moreover, they might be offering you a better deal than the dealer is offering. 

If you are accepting the deal from a different company, they are the ones who will pay the dealer for the cat, and you have to repat the company that you have borrowed the money from.

Which Finance Option Works Best?

Selecting the most suitable financing solution depends on individual circumstances. Consider these factors:

HP – Best for those who prioritize ownership and need a structured repayment plan without a large final payment.

PCP – Ideal for buyers who prefer flexibility and lower monthly costs but can secure approval with a good deposit.

Personal Loans – Suitable for applicants with stronger credit who want complete control over their purchase.

Tips to Improve Approval Chances

Enhancing financial standing increases the likelihood of securing a favorable finance deal.

• Increase the deposit: A larger upfront payment reduces lender risk.
• Improve credit score: Settling outstanding debts and making timely bill payments helps strengthen eligibility.
• Consider a guarantor: A creditworthy co-signer reassures lenders.
• Compare multiple offers: Exploring different finance providers ensures the best possible terms.

Final Thoughts

It is not impossible to get car finance with bad credit. By exploring HP, PCP, and personal loan options, buyers can pick the most manageable route. Platforms such as CarMoney cut down the search by connecting applicants with lenders. 

Now that you are aware of the difference between PCP vs HP, you have to decide which one will suit you best. The two financial products perform differently. However, PCP deals are more popular than HP deals, and most markets prefer PCP.

READ MORE:

• Top 10 Factors to Consider When Picking Personal Loans
• Common Mistakes People Make When Taking Personal Loans
• The Benefits of Combining Personal Loans and Mortgage Loans for Financial Flexibility