Car loan madness

Pinkus

Hi all,

I've registered to as I'm bewildered with my recent experiences of attempting to obtain a car loan and wonder whether anyone can shed any light or offer any advice. I've read these forums for some years and they are excellent.

Basic details:

1. I earn good money
2. I've ~ £6k saved and am currently saving c.£600.00 p/m
3. In 2005 I took out a Barclay's professional studies loan that has c.£7k outstanding (from £25k + interest);
4. Given Martin's advice, I'm going to pay the PSL two years early with my savings as soon as I've hit the magic redemption figure. Millstone from my neck.
5. My car is knackered and I need a new one -- it needs to eat 17,000 miles a year for 5 years. As such, I'm looking to spend £7-8K on it over 3 years.
6. Credit report states 999 rating; no defaults ever, although I've only been at current address for 6 months.

Naturally, I went to Barclay's to source a car loan. 13.9% for up-to £7,499; 10.9% for £7500 + pre-approved. Thought that was a bit pricey considering that my account is in good order. Went away to find a car. Found a car for £6995. Saw a Derbyshire loan offer at 5.9%, so decided to apply. Turned down. Went back to the pre-approved loan at Barclay's and the interest rate is now 18.9%!

What can a) cause me to be turned down for a loan I can clearly afford; and b) is there any reason the interest rate at Barclay's has soared by 5%? I'm about to be debt free, for goodness sake, and will have £900.00 a month spare.

I'm absolutely bewildered and tired with the whole car buying process. Any help would be gratefully received.

Pinkus.

BugsyBrowne

You failed derbyshire's credit scoring simple.

Without knowing your credit history its hard to give an opinion.

opinions4u

What can a) cause me to be turned down for a loan I can clearly afford

Low rate = picky lender. They cream off the best applicants only. Six months at current address isn't good.

b) is there any reason the interest rate at Barclay's has soared by 5%? I'm about to be debt free, for goodness sake, and will have £900.00 a month spare.

They didn't like the extra credit search.

BugsyBrowne

They didn't like that search and a lender certainty ain't going to like the next one neither.

Pinkus

BugsyBrowne wrote: »

You failed derbyshire's credit scoring simple.

Without knowing your credit history its hard to give an opinion.

On reviewing the Experian report, the Derbyshire don't appear to have made a search against the record so, presumably, I was declined on the basis of the application.

It's crazy. Last car loan I took, I was £25k in debt and still got 14% interest on a £5k loan. Ahhh, the heady pre-recession days.

CLAPTON

you have 6K already so why not just spend that on the car?
plenty of decent stuff around for that price

Pinkus

CLAPTON wrote: »

you have 6K already so why not just spend that on the car?
plenty of decent stuff around for that price

The £6k is going toward paying-off existing Barclay's lending next month; that's been £300.00 a month for the past 8 years so it needs to go.

bigadaj

Pinkus wrote: »

The £6k is going toward paying-off existing Barclay's lending next month; that's been £300.00 a month for the past 8 years so it needs to go.

Depends on the rate.

forgotmyname

How can people advise if you leak out the facts bit by bit?

How many loans do you have? Total % of your income?

How much surplus do you have each month?

Use the £6000 to buy a car then pay the other loan in 10 months?

wildingb

You are paying 300/month for 8 years. You have 7000 left, from an original loan of 25,000.
You have paid around 28000 already. You interest rate must have been around 6% on the PSL, maybe less?

And you want to borrow money to get a car at 10% interest rate.

My advice is no, no and no.
Buy a cheaper car for around 4000 with cash. Get a good deal from a private seller.
Use your earning to replace your saving, should take 6 months =3600.
Then pay off the PSL loan.
PSL = 7000-6x300=5200.
2000 old savings+3600 new savings=5600

Save another 10 months at 600/month = 6000,
sell your 4000 car privately for around 3500.
Now buy a better car for 9500.

In 16 months you have 9000 car and no debt.

Don't be in a hurry to get into debt.
http://www.daveramsey.com/article/the-truth-about-car-payments/lifeandmoney_automobiles/

Pinkus

forgotmyname wrote: »

How can people advise if you leak out the facts bit by bit?

How many loans do you have? Total % of your income?

How much surplus do you have each month?

Use the £6000 to buy a car then pay the other loan in 10 months?

1. Apologies -- didn't know what information was needed
2. 1 loan that accounts for about a 7th of monthly income.
3. Surplus each month, after all usual outgoings is c.£500-£600 at the moment, c.£900 once the existing loan is paid.