Taking out a loan, at 21.

Crumpyz

Hello everyone,

I'm hoping someone can help me with a few questions I have about getting my first loan for a car. Thanks in advance!!

Right so here it is, I'm 21, never had a loan before. I've been working as an apprentice engineer for a year now, and roughly I take home 18,000 a year before tax with pay rises each year until im on top rate. Problem which I am currently worrying about is my credit rating. I've never had a credit card, never needed one, never had an overdraft as I didn't seem to need one either, but it appears not getting in to debt doesn't mean lenders pay attention to you. Out goings I have or have had, is insurance which I pay monthly so surely that gives me some credit as I thought it was some sort of finance? Phone bills and other membership monthly payments, and rent but that's paid as cash so doesn't make a difference. So I was hoping that this would be enough to give me some sort of credit.

Anyways I applied for a loan online, tesco's to be precise, for a £5000 loan over two years. But I got rejected. But after reading about, apparently a lot of people get rejected online, this still was demoralizing though.

I'm with santander and they will not give a loan to anyone below the age of 21, so wondered in there a week after 21 and they said the system has not updated yet so its not worth applying tilll it has or you will just be rejected. So impateintly I saw a better deal on tesco's and went for it.

Will getting a loan through my bank ive been with 8 years make a difference to an online application? As I asume they just enter everything into a system the same as online and it gives them the answer they requied to lend or not?

I was wondering if it is more difficult to get a £5000+ loan than it is to get one below that sum of money, being in a lower interest bracket. My brother said it does make a difference as its considered a "large loan" but not really borrowed money before so I have no idea. My friend who recently got a loan for £3000 from tesco's online, but is in the same seat as me, never had a credit card and only just recently got an overdraft which he just started using and I don't like saying it but he even earns less money than me a year... so this is just leaving me very confused to why I got rejected and I don't want to reapply incase i get another mark against my name. Would it be advised to perhaps get a 4,900 loan even though the interest rate would be higher, but perhaps a high chance of success?

Apologies for the story! Thanks ever so much to anyone who can help.

Tixy

Hi

I wouldn't go comparing your ability to get credit to a friends that you feel is in a similar situation - they may well be other factors you are unaware of.

Firstly are you on the electoral roll at your current address?

Your insurance may well not appear on your credit files (although it could) - you would need to check your files to know for sure.

If you have a monthly contract for your phone that should appear. Some other memberships like gyms can do (but don't always). Have you always paid your mobile phone bill on time every month?

In terms of you thinking that tesco had a better loan and that the interest rate would be higher for a £4900 loan compared to £5000 - are you aware that the published rates are just representative rates - the rate that only 51% of successful applicants are offered. Chances with a very limited credit history then even if you do get accepted for a loan it may well be at a much higher APR than the representative rate.

Regarding being accepted - £4900 or £5k very little difference, as there is little difference in the amount of the loabn. If you were comparing an £8k loan to a £4k loan then certainly the lower rate should be easier to obtain.

Often your own bank are a better place to start if you have little credit history - they can presumably see you have a regular income being paid into your current account - and can asses your affordability a little better (if you currently regularly spend all your wages in a week of payday then they are going to worry you can't afford the repayments, if you have a couple of hundred left in the bank the day before payday then they will have more comfort you can afford the repayments).

DCFC79

Could you not save up the cash

KingElvis

You just sound like you have very little history so expect rejection.

Crumpyz

Firstly thanks for replying .

I did think there would be to many variables to compare against a friend just didn't realise credit was as strict as it was, but reading up over the last two days I see why.

Well I live at home so I've been on the roll since I was young, pay my parents rent by cash.

Still waiting for my experian pin to come through so will check as soon as its in. I also forgot to mention I've purchased a couple of guitars through a finance agreement over 10 months on the goverment grant thingy sceme they had a few years back, so I paid back 10% each month, and they weren't cheap, so was hoping that would show up but not sure as it is was like a grant thing.

Oh I didn't realise that only 51% of people actually get the rate offered, it really is hard to get somewhere with credit it seems . I'm thinking of getting a credit card use it for everything and pay it off before the end of the month, would that still aquire credit? Just thinking for the future as I don't won't to be declined when I have a familly and so on.

Oh okay, pretty much pointless to knock a couple of hundred off of the loan then.

I will just wait for my bank's system to update and go in, I thought they just used a automated system, but after what you said hopefully they can trust me. I get paid weekly and at the next pay day always have 100-150+ left in my bank from the week before so I just end up saving it week by week, I do have a fair bit sat in there at the moment, but its been put aside for insurance to be fully paid off this time in one hit so i have less out goings each month.

I would save the money normally, but my current car having a mechanical failure has put me without one. And a familly freind offered me a low milage car for cheap, so hence why I want the money quickly. Life is life I suppose may just have to be patient and save up, and try to get credit somehow.

Still thanks for replying, it helped a lot.

ViolaLass

Getting a credit card and paying it off IN FULL every month will help.

jason1231972

Crumpyz wrote: »

I will just wait for my bank's system to update and go in

I don't really get this. Your bank can tell you're 21 from literally the time 00:00:01 on your 21st birthday. No system update required. They'll have had your DOB on file from the very first day you applied to bank with them.

Anyway, your main bank is your best bet, 'system' issue aside!! However, that's not to say you'll actually be successful. Unsecured personal loans from reputable lenders (banks, supermarkets, etc.) aren't always the easiest product to get your mitts on, particularly with a limited proven history of managing credit. It's quite a big leap for a lender to see someone paying phonebills, etc., and use that basis to approve sums in the thousands. Unfortunately, they'll see no evidence of you paying your parents rent, etc.

A £5,000 24 month loan with Santander costs over £225 per month to repay, which is a fair chunk of an £18k salary.

When did you actually apply for the Tesco loan? If it's very recently, I'd wait until 3 (ideally 6, very ideally 12) months have elapsed before re-applying elsewhere. This is because Santander, or anyone else, would be able to see that you'd recently made a credit application elsewhere (though they won't see that you were rejected), which may work against you.