Where to go for first ever loan

Hootie19

Our daughter is about to take her driving test, and wants to have a car in place ready for when she passes (I know! I know! I know! - but at almost 21, are you going to listen to your parents???)

She has seen a really nice little car which is for sale for £2,450 and needs to get a loan to pay for it.

She is 20 years old, has never had any kind of credit in the past, and three "main" places she has tried has rejected her (her own bank, Alliance & Leicester and Lloyds TBS - my bank). Only one, Welcome Finance accepted her - offered her £1,800 over three years for £149-odd a month. I told her never in a month of Sundays!!

She has no outgoings by way of direct debits or standing orders. She earns between £650 and £800 a month take home, depending on what, if any, overtime is available (she is a nursery nurse). She has been working there for 4 months, and was in her last job for only 5 months before her relationship broke down and she returned home to live here.

She pays £200 board and lodgings to me, and that's all her outgoings.

Is this a case where she's going to have to get a credit card just to build up some kind of credit rating, as she has nothing in her past to be judged on?

Or will her dad's and my poor credit ratings (being repaired, but it's a long haul) affect her? Is there some way she can disassociate herself from us financially, so we are not holding her back, so to speak?


ETA - we have searched on moneysupermarket for loan comparisons, requesting a £2,500 loan over 5 years. Their notation said that her credit rating "needs improvement". That's after putting in no overdraft, no loans, no defaults, no CCJs, etc - no nothing. How can she possibly improve it??

CLAPTON

she needs to get copies of her credit records to check what they say.
there should be no association with you but best to check.

with an income as low as that she really shouldn't consider a car... has she worked out what insurance, tax, mot, repairs, breakdown cover will cost her; unless she expects to live with you indefinitely

on that salary she needs to learn to save before spending

once she has checked her credit records then applying for a credit card would make sense to build up a credit rating but she needs to be careful to always pay in full each month

Hootie19

Thank you CLAPTON. She is due a pay increase after six months' service at work, so another couple of months, plus in January when she is 21, national minimum wage will mean an increase as well (unless her increase from 6 months' service takes her over NMW).

She's got an insurance quote for £1,000 roughly with her as policyholder, or if I took out a policy with her as a named driver, it's half that. Breakdown cover is £80 per annum with Tesco, and her dad and I would be happy to get her that as her Christmas present this year.

Obviously you never know until you're running a car what the servicing costs etc are like, but we do have a fantastic mechanic who does our servicing, and he's extremely fair.

She has been saving £50 a month since she moved back here in May - I hold her ISA book so she has no temptation to withdraw!

She is certainly going to be living here for the next year or two at least, and the car is all she's focusing on at the moment. Most of her friends live a distance away and late evening/night time public transport isn't the best.

We will get a copy of her credit record though - thank you for that. I didn't even consider that, as she's never had any credit to be recorded.

CLAPTON

just to say, be very careful about you taking out a policy with her as a named driver... if she has an accident and they discover that she's really the main driver then the insurance would be invalid... so she could be done for driving while un-insured

tictax

you hold your daughters ISA book?

sounds to me like she can't be trusted not to spend. can your daughter not save up for the car? can she not buy a really cheap run around in the region of £750-1000?

clapton is right about the insurance - your daughter really needs to have it in her name. remember if she buys a car for £750 she would only really need 3rd party insurance which should reduce the cost.

sportage1kia

Hi there
Just happen to see your thread, these high street finance companies will charge you high interest, so I would not go down that path. If you have a local credit union in your area I would pop in there, your daughter would have to save first then normally she could borrow 1 1/2 times her savings, but for loans over £2000 they will require proof of income, otherwise the CAB might be able to help.
Regards

jonesMUFCforever

The only point I would like to make is that if she is only saving £50 per month then her monthly repayments should be no more than this - anything more and it will become a struggle.
#This is before tax, insurance, running costs, servicing etc etc.

ibleedred

Can I also state...

I hope she isn't relying on turning 21 for a National Minimum Wage increase.

The bands for NMW are:

£5.52 per hour for workers aged 22 years and older
A development rate of £4.60 per hour for workers aged 18-21 inclusive
£3.40 per hour for all workers under the age of 18, who are no longer of compulsory school age.