21years old first ever loan

littlemissfrugal

Hi my daughter is wanting to buy a new car - she has been offered £1000 part exchange on her old car against a car of £ 4000, so is looking to borrow £3k. She has a good job with the local authority for 2 years earns about £11k basic she has no credit of any kind she runs her current account with Alliance & Leicester fairly well. she doesn't live at home with us but rents another property from us. I would like advice as to how to go about helping her to get finance, the garage have said they could arrange it but fees are high the A&L have a loan at 14.9% which she could afford if approved but the Post Office have a better rate - should we aply to her own bank or go for the better rate with the PO I am concerned about her stamping all over her credit file before she has even established one - advice gratefully received by anxious mum

thanks in advance

PNPSUKNET

been honest try her own bank, her salary isnt really that big compared to the amount requested so others may look at been a high risk

Tixy

She should certainly stand a better chance of getting a loan with her own bank. But with no existing credit reports at all she may not get one even from them.

Is the Post office 13.9% typical compared to A&L 14.9%? typical.
If so on a 3year repayment you are talking about a difference in total interest of only about £50.
Although of course she might be required to pay a higher rate anyway with either.

littlemissfrugal

quick update - my DD applied to her bank (A&L) and today recieved a letter from Santander saying she had been declined but could appeal. So I am helping her with that and we have also ordered her credit report - though having had no credit cannot see what this could contain. She was obviously disappointed and annoyed that "19 year old oiks can get finance for their VTRs why cant I?" Any other advice would be appreciated though she has resigned herself to the fact that she will probably lose the car she was after

DomRidd

I assume she's on the electoral register? Had she not had any credit history? Phone contract?

CLAPTON

11k is a very modest income
it would be much better for her to save up for things she needs even if her friends don't
why pay 14% or probably more in interest when you don't have too.
what's wrong with her current car?

JimmyTheWig

Totally agree with Clapton that saving up is the better idea. But can understand your daughter not being impressed with that idea.
You say the garage fees are high. How high are we talking?

Tixy

The oiks she mentioned may well have got secured finance on their cars. These are generally easier to get as there is less risk to the lender, as they can reposses the car if payments are not made on time. The rates may well be quite a bit higher than A&L and the post office as well.

They also may have had credit cards and phone contracts for a year or so which will have improved their chances of getting credit.

Whatever she decides to do now (and saving up obviously would be preferable financially) she might want to look at starting to build a good credit history now. This may mean getting a credit card with a low limit and using it but paying it off each month so she doesn't actually pay interest - eg perhaps she could buy her petrol on it each month and then set up a DD to pay the full amount each month. This will help her when it comes to obtaining credit or a mortgage in future.

bouncydog1

Just a suggestion, but as others say, your daughter is unlikely to have much creditworthiness just because she hasn't had any. How about approaching your bank with her for a loan, that you could act as guarantor on?

Presumably you have a good credit history and this might be something that your own bank may consider, as it would be gaining them another customer.

The only other thing that I could suggest would be for you to loan her the money, at a rate of interest - you might decide to charge her a lesser amount than the outrageous amounts being quoted - still giving you a better return on your investment than depositing with the bank.


This would also mean that your daughter would have the committment of paying back a loan but would also be helping her with a lower rate. In the meantime she could work on building up her credit file - electoral roll, credit card with small limit paid off in full every month etc.

Just to mention that if she does get a credit card also ensure that she gets a points card for wherever she chooses to buy her petrol e.g. Tesco - so that she learns about making the most of her money.

Please dissuade her from using rip-off finance companies - as others say she really should try and save up but I do know that once your car gets old it is often a case of throwing good money after bad and deciding when to cut your losses.

JimmyTheWig

bouncyd!!! wrote: »

The only other thing that I could suggest would be for you to loan her the money, at a rate of interest - you might decide to charge her a lesser amount than the outrageous amounts being quoted - still giving you a better return on your investment than depositing with the bank.

I like this idea. Though if you could afford it I'd prefer to do it interest free (or at least match your savings interest) as long as she kept up the repayment plan.

You could combine this with the saving up idea. You could offer to match (with an interest free loan) anything she can stump up. So if she's got £1k from the part exchange and can save up another £1k you could lend her the other £2k.