There are many ways to finance a vehicle purchase in the UK. If you go through your motor dealer than you could look at Personal Contract Purchase, Hire Purchase, Contract Hire, Lease Purchase and many more. All of these types of finance are linked to the vehicle purchase, in that you would be required to settle the finance to own the vehicle outright.

However, if you turn to your bank, or another ‘direct’ lender for a personal loan then this type of finance is slightly different. Not only do you lose your termination and repossession rights, as the vehicle is not linked to the vehicle like it is with Hire Purchase, you will not have to pay off the personal loan with your bank to own the vehicle outright. With a personal loan you actually own the vehicle from day one, with no financial call from the lender. The loan is against you, and not the vehicle.

gap insurance options

What are your Gap Insurance options when you take a bank loan over a dealer agreement?

With more and more consumers turning to online providers for Gap Insurance, and this normally means a range of products on offer, how do you know what to do when you have purchased the vehicle on a personal loan?

So how does a personal loan effect your options when it comes to your Gap Insurance options?

Many people, who take a finance agreement of some kind, are worried that in the event of a total loss that they will owe more to the finance company than the vehicle is worth. If a small deposit is paid towards the purchase, and the majority of the purchase of the vehicle is actually financed, then this could well be the case.

If you take vehicle finance through the motor dealer, and the finance is linked to the vehicle sale, then one of your options would include Finance Gap. This will protect between the motor insurers settlement and the outstanding finance settlement.

However, if you take a personal loan the Finance Gap is not normally a valid form of protection. This is because the finance terms ensure the agreement is not linked to the vehicle, and you own the vehicle outright.

So if you are considering buying a vehicle with a personal loan, then the more appropriate types of cover will be Return to Invoice or Vehicle Replacement Gap, and bear in mind you finance agreement will not be covered in the event of a total loss.


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