Perosonal Loan - Rubbish 13.2% APR rate

gastroboy

Hi All

Got a bit of a dilema so I hope you guys will here me out.

My GF and I are looking to get a car and a flat but we are not having much luck on the flat front because we are still very cautious of overpaying for something in the falling market.

So we think it will be another 6 months before we buy a place and want to get a car in the meantime. We only plan on spending £15k on the car (second hand one). Now, here comes my dilema

Should we purchase the car by taking out a personal loan? We were thinking about taking out a £12k loan so we can repay it all within 12 months. I checked with Egg and they gave me a quote for at 13.2% APR and also HSBC gave me a quote at 15.2%! APR.

The rate is pretty rubbish but okay given that we have been in the UK only 2 years from overseas. I am in the process of getting my credit report but Experian say they need to check something??? Should we take the hit to build up our credit score or not?

My other thought is to wait until we get a flat and hopefully by having a mortage our credit score improves and we'll get a better rate for the personal loan? Is that how it would work normally?

We have enough to buy the car outright but want to keep the money for the deposit so we can act quickly if need be, hence the idea of getting a loan.

Thanks!

iolanthe07

You will be able to buy a perfectly decent second hand car for well under £15k.

gastroboy

iolanthe07 wrote: »

You will be able to buy a perfectly decent second hand car for well under £15k.

I know and hopefully I will but I should have said £15k is the max.

but does anyone know whether my loan rate will go down if I have a mortgage to improve my credit rating?

marshallka

gastroboy wrote: »

I know and hopefully I will but I should have said £15k is the max.

but does anyone know whether my loan rate will go down if I have a mortgage to improve my credit rating?

Seems a drastic thing to do just to get your credit rating up:eek: and your interest APR down??

milliemonster

To be honest, I think it would depend on what your mortgage was for in relation to your incomes, on one hand having a mortgage makes you more creditworthy but on the other if you have a sizeable mortgage and then apply for a large loan, the APR given to you will reflect how big a risk they think you are so its not as simple as you think

Why on earth do you want a car for £15k anyway?, why don't you half that and put the rest towards your flat?

gastroboy

milliemonster wrote: »

To be honest, I think it would depend on what your mortgage was for in relation to your incomes, on one hand having a mortgage makes you more creditworthy but on the other if you have a sizeable mortgage and then apply for a large loan, the APR given to you will reflect how big a risk they think you are so its not as simple as you think

Why on earth do you want a car for £15k anyway?, why don't you half that and put the rest towards your flat?

Thanks, that's a really good point milliemonster. We expect that the mortgage payments will be 35% of our take home salaries adding the personal loan repayment per month (for £12k over 1 year) would bring it 50%. Are we stretching ourselves too much? Sorry, as you might have guessed I have no idea about this kind of thing.

sammyjammy

Are you saying your take home joint pay is over £7k?

gastroboy

sammyjammy wrote: »

Are you saying your take home joint pay is over £7k?

um. nearly.

milliemonster

I think 50% of your take home pay on credit/mortgage is a lot, having said that, if your monthly income is going to be £7k you would still be left with £3.5k a month for everything else so may not be such an issue. If you are going to do this though, you may be better applying for the loan after you move in, if you do it beforehand (esp over 12 months) they will deduct a proportion of what you owe on credit off the amount they will lend for your mortgage (I can't remember exactly how much though)

gastroboy

milliemonster wrote: »

I think 50% of your take home pay on credit/mortgage is a lot, having said that, if your monthly income is going to be £7k you would still be left with £3.5k a month for everything else so may not be such an issue. If you are going to do this though, you may be better applying for the loan after you move in, if you do it beforehand (esp over 12 months) they will deduct a proportion of what you owe on credit off the amount they will lend for your mortgage (I can't remember exactly how much though)

Thanks again. I think if there is a chance of the mortgage being affected I'd rather hold off on the car rather than risk the mortgage (especially in this climate). I'll speak to the bank first but I expect that you are right.

and yeah, 50% (although only for 1 year) does freak me out...alot...never been in debt before and the thought of it makes me sweat :eek:

thanks for the comments everyone!

WhySoHard_2

So both you and your GF are on approx £70k a year. Interesting.