Credit card, loan or something else?

Lieja

Hello,

I'm sorry if this is on the wrong board, I'm not sure where it should be. I'm basically just looking for some help on buying a car, as I'm getting very confused trying to research myself.

I've currently got a graduate overdraft, a student credit card, and have always lived within these limits. I don't know much about loans or credit cards as the only one I have was offered by my bank and I accepted!

I'm now in a position where I would like to borrow some money to buy a car - nothing extravagant, I've been offered a job and would need a car ASAP if I were to accept the offer.

The problem I have is I have no idea where to start with knowing what is the best option for me. I work full time albeit for minimum wage (the new job wouldn't be more money, but lots more opportunity and job satisfaction) and live with my partner, total take-home income of around £28000. My partner has terrible credit and so I don't want to make an application with him as we would be rejected and I don't want my credit linked with his as mine is looking fine!

I earn around £12000 alone, and would be looking to borrow around £2000 - what are my options? I have applied for credit cards and been rejected (not sure why, never missed payment although I do only pay the minimum due on my student card). I also work two jobs and often this is difficult to explain in an online application so wondering if this is why?! I also have had erratic earnings that go up and down a lot in the last couple of years, although I now have stable hours.

As far as I can tell, I may try for car finance with a dealership, a bank loan or a credit card? For this amount would finding a good credit card be my best bet? I'm reluctant to ask my own bank as I assume they will see me living in my overdraft as something to be avoided!

I'm sorry if I sound very stupid, but things like interest rates and balance transfers baffle me when I'm looking at application forms!

liamfahy

If you are currently on minimum wage with an overdraft and credit card debt then taking on more debt is not a good idea. I would look for a job with more income where you don't need a car and start paying down some of that debt as it's currently holding you back in achieving your goals.

Lieja

Obviously that would be the best solution, but I'm being realistic here and that is just not going to happen! The new job would be minimum wage for 6 months, with the prospect of a higher wage afterwards all other things being equal. Of course I'm not relying on this happening, but my current jobs have no prospects in terms of money or opportunity. Just going out and getting a higher paid job is not all that easy!

My partner and I share all things financial, so his wages would help with repayments, I'm just reluctant to put his name on an application.

Also, I really need a car where I live - we do have an old banger that my partner uses for work and I usually walk the 5 miles to work but the new job is not walking distance even for me! I know moving house would solve a problem or two but I pretty much entirely love where I live and am not looking at moving in the next few months. I really just want to know where to start looking and what I'm looking for - I'm sure there's a very sensible option but I really need to take this job, and we can afford to make repayments after bills etc each month.

bigadaj

Remember the cost of running a car is significant, it's just not paying or financing it, you'd need to budget for insurance, tax, servicing etc.

It appears that there are no public transport options for you, would there be an option to car share with your colleagues, or see if your employer could provide or assist with transport, at least initially?

Lieja

Thanks for the reply - I understand the costs of running a car and have always managed to cover these costs in the past, and I don't think it would be too much of a problem as I plan to buy something fairly sensible that wont cost the earth in tax and insurance. Just something to get me from home to work and back, and maybe the shops once in a while.

I don't think there'll be an option for my employer to help, and I doubt any colleagues would live anywhere near me! I suppose I'm just looking for the cheapest and easiest way for someone in my situation to borrow a little bit of money, and paying back shouldn't be too problematic as we aren't extravagant in the least and live very frugally in most respects. My debts exist more out of laziness than anything else as I have never really bothered to make more payment than they automatically take per month. My credit card limit is only £500 and I haven't quite reached it yet and haven't used the thing in over a year! My overdraft is interest free and considering I only graduated last year, I don't think they'll want that repaying in the next six months.

Is finance offered by dealerships usually more expensive than borrowing elsewhere? I'm thinking that this may be the simplest option for me as I don't really know where to start with anything else.

I'm a perfect example of why financial education should be taught in schools. I know how to manage my money in simple terms but anything more complicated goes right over my head!

bigadaj

It's a good thing to be honest and admit any weak points in your financial management, but you then need to address them.

With respect your credit card then you should be looking to pay this off in full every month, always looks good as well as saving interest.

Finance from a. Dealer can be useful as there is an incentive for them to make a sale, and there is the security of teh vehicle. However be very careful as they normally quote finance as flat rate, this normally works out as half the apr, so if they say they can offer you a rate of 10% then that will mean an apr of 20%.

Lieja

I really should sort out paying off my credit card - I don't notice the monthly payments but I'm essentially paying only interest and next to nothing off my debt. I'll look into upping my direct debit so it gets paid off. I assume this will look better on my report? I only accepted the card as I'd been told that I needed one to get a good credit score, so even though I've only made minimum payments will this have helped or hindered my score?

Are car finance companies usually easier to borrow from, as I'm starting to think I'd struggle with getting another type of loan due to my low income.

One last thing - I asked this on another thread but didn't get an answer. Would having a broadband account in a different address from all my other accounts look dodgy on my report? It's in my parent's house and they pay, but it's always been in my name and wasn't changed when they took over.

Thanks for the help

CKhalvashi

Lieja wrote: »

One last thing - I asked this on another thread but didn't get an answer. Would having a broadband account in a different address from all my other accounts look dodgy on my report? It's in my parent's house and they pay, but it's always been in my name and wasn't changed when they took over.

I've still got an account showing on my credit report at our London address, so it shouldn't be an issue.

The company never updated, and as long as it's been paid each month, it could be helping you if its reporting.

CK

Lieja

That's fine then, my dad has perfect credit so I can trust him to make payments and hopefully it'll help my score!

Thanks for the replies everyone

Lieja

Hello again, sorry to dig this back up but I'd like a bit more advice.

I went to my bank (natwest) to apply for the YourPoints MasterCard, and the lady was very helpful and after looking at my accounts was quite confident that I'd be accepted. She filled in the form with my new job details (starting 20th of this month) as I'd told her that I wasn't sure which job details to use.

My application was refused and she couldn't tell me why, but guessed it was because she'd used my new job details instead of my current job details! Obviously I don't know if this has actually been the reason, but I'm pretty annoyed now that I might have been accepted if she'd used my current details. She said my earnings were high enough and my accounts with them are fine.

I assume I now can't reapply for the same card for a few months?

I'm getting a bit frustrated with all this as I went to the bank to fill my application in because I didn't know what details to include and it seems that neither did she!

Is there anywhere I can go with this? I'm pretty sure I won't stand a chance with cards outside of my own bank after trying the eligibility checker on here and I'd really rather not pay extra through finance all because my form wasn't filled in right!