Please help need advice - rejected for loan!!

S3quence

Hi

I was applying for a loan from Barclaycard (@6.3 typical apr) for £20,000
and they rejected me!!!

I am 23 I have a decent job paying me £32,500 a year and am a homeowner why will they not lend me anything (not even less than £20,000) not a penny?

Here is a summary of my finances...

Incoming:
Approx £2,200 after tax (inc overtime)

Outgoing:
Morgage inc all bills = £680 (Into mine and the girlfreinds joint account)
Mobile Phone = £40
Car Payments = £260 (via loan with barclaycard loans)
Gym = £35

Other things I can think of that might affect it...
- Had interest free loan for 12mths for couch paid off this month (£1000)
- Had storecard I paid off in full 2mths ago (£150)
- Got mortgage last year (Oct)
- Have lived at this address since Oct, previous address renting for 12mths
before that 21yrs with parents
- I have had 1x small loan for £1000 for a laptop a few yrs ago
- Im on the electrol roll
- im in overdraft of £600 normally - no interest (but paying this off £300 over next 2 months)
- Have £1000 in savings
- I have missed one council tax payment as they "forgot" to set up the direct debit. Though was paid the next day
- I have gone over my overdraft a couple of times (mainly cos of a company taking out a payment they shouldnt have or money not going in on time) but thesew have all been refunded (thanks to martin) or they didnt charge me for anything

I have about £1000 after my bills are paid to save, go pub, do whatever!

I have my car loan which I have the settlement figure of £9,000 for I am selling my car for £9,000 to pay this off and wanted to take out a loan for £20,000 for my new car @ £388 a month which is £110 more a month than I pay now and can afford.

I was shocked when they said they would not give me a loan for anything!! I am a customer with them for my car loan but this is a different dept (BC Motorloan and not Barclaycard Loans) so wont extend the loan or do anything with it, like they are 2 seperate companies.

Does anyone know why they might have rejected me? or how this will affect my credit rating or future credit attempts? Im thinking im going to leave 6 months now and clear up my overdraft and save a little, and even pay some off my current car loan. But will i get the same problems in 6 months time?

Hopefully someone has some advice for me as I dont want to have problems later on or keep getting rejected!

LOL unless someone wants to lend me £20k over 5 years for £6.2% :rolleyes:

Paulxo

Why do you want a 20k car anyway?

Will it bring joy into your life?

Seems like you're living a life of desire. This will only lead to misery. I think you really need to get on top of some of your (unclear) debts. I can't see how you can afford this car if you only have one income. You're going to be chained to it for a while.

One rule I have is 'Never borrow to buy a depreciating asset'. Judging by the price of this car it will depreciate like a stone, but your loan will APPRECIATE in size, and you'll end up paying more than 20k. How's that going to bring JOY into your life?

I suggest you find a source of income that will pay for the car before you buy it and lock yourself in to years of overpayment.

Surely a 9k car will do you for now? It's not clear why you need a better one! And i mean.... NEED.

Emmzi

I would suggest

1) you haven't been at your address long enough. Try in Novemeber, some give more 'points' on the score for a year
2) the repaid sofa loan won't be showing as clear on credit report, give it a couple of months
3) repay your overdraft with your savings, and cancel it. Ging over it may not be helping
4) get a copy of your credit report to check what's on there.

In addition, as far as loan to wages ratio - it's a bit high, IMHO. Would a nice spiffy £15k car do you? (less than half income = more likely to happen. Less than one third = even more likely. etc.)

S3quence

Emmzi wrote: »

I would suggest

1) you haven't been at your address long enough. Try in Novemeber, some give more 'points' on the score for a year
2) the repaid sofa loan won't be showing as clear on credit report, give it a couple of months
3) repay your overdraft with your savings, and cancel it. Ging over it may not be helping
4) get a copy of your credit report to check what's on there.

In addition, as far as loan to wages ratio - it's a bit high, IMHO. Would a nice spiffy £15k car do you? (less than half income = more likely to happen. Less than one third = even more likely. etc.)

Thank all for the advice,

in particular Emmzi This is more the advice I was looking for. Finding out the reason why (IMO) they turned me down for a loan I feel i can comfortably afford

Im not too sure why the others cant understand what my current debts are... as i states above

Incoming (After Tax) = £2200
Outgoings = Morgage and bills £680, Mobile Phone £40, Current Car Loan = £260, Gym = £35
TOTAL = £1015
Leaving £1,185 after tax

These are currently the only things coming out my current account (other than odd bits I withdraw during the week)

I put the other things on like the recently paid off couch payment as i was unsure how long this would take to clear and unsure if this would affect their decision.

The current car loan will be paid off so freeing up £260 (ie if i got the loan its £380, £120 more a month!)

The overdraft I admit was a bad idea. I got it when I was younger and never paid it off. Bad i know which is why im sorting it out now. I also admit that I should pay it off but never got round to it and as they dont charge me anything for it I never saw paying it off as a priority. More of a really bad habit than a bad debt. That is why I am paying it off (@300 for 2 months) I could pay it all off now but as they dont charge me for it and I have a savings account. I'd rather put the money in and earn a small amount of interest on it then pay it off in full keeping the (small) difference. Plus I go on holiday this month so didnt want to pay it off and then have to go back into it. The hol was paid for a long time ago and I already have the spending money so wanted to do it in 2 parts for less hassle.

The car in itself is definetly more a want than a need. But at the end of the day why does anyone work hard and save money to buy the things we want (and need). I dont need anything at the moment...i'm 23, earning £32k a year which is quite good in my opinion, I have used all my savings to buy my house and furniture, and only ever spent on a few luxuries like my laptop (which I use for work). I have settled the few outstanding debts I had) I have saved a small amount (for emergancies only) and now want to spend some of the money I have earned. I accept that I will pay more than the £20k (£23k i think) but the reality is that I prob couldn't save £20k

Saving £600 a month it would take 2.7ish years to save that up.
Chances are if they approved me for the loan would overpay anyway or save up in an ISA or a highest interest account (paying more than 6.3%) and make lump some payments. Chances are I wont have the debt at 5 years and wont have paid the full interest.

As for the depreciation I know cars depreciate alot but chances are if you keep it in good condition you can sell it not that much less than you bought it for. I have sold a car I bought 2 yrs ago for 11k for 9k. There are 2nd hand versions of the car I want to buy for 19.5k and 19k that are 6mths old. So people are selling it (and getting the prices) for almost what they bought it for.

£20k is alot for a car but this is a purchase that I wish to make, its something that I will be keeping for at least 5 years and something im interested in personally and would enjoy alot. Its a high spec new car and not something that I would easily be changing!

Thankyou for all your comments, If anyone else has experiance of a similar rejection situation and have an idea why they were rejected please let me know...

Paulxo

S3quence wrote: »

Thank all for the advice,


The car in itself is definetly more a want than a need. But at the end of the day why does anyone work hard and save money to buy the things we want (and need). I dont need anything at the moment...i'm 23, earning £32k a year which is quite good in my opinion, I have used all my savings to buy my house and furniture, and only ever spent on a few luxuries like my laptop (which I use for work). I have settled the few outstanding debts I had) I have saved a small amount (for emergancies only) and now want to spend some of the money I have earned. I accept that I will pay more than the £20k (£23k i think) but the reality is that I prob couldn't save £20k

Saving £600 a month it would take 2.7ish years to save that up.
Chances are if they approved me for the loan would overpay anyway or save up in an ISA or a highest interest account (paying more than 6.3%) and make lump some payments. Chances are I wont have the debt at 5 years and wont have paid the full interest.

As for the depreciation I know cars depreciate alot but chances are if you keep it in good condition you can sell it not that much less than you bought it for. I have sold a car I bought 2 yrs ago for 11k for 9k. There are 2nd hand versions of the car I want to buy for 19.5k and 19k that are 6mths old. So people are selling it (and getting the prices) for almost what they bought it for.

£20k is alot for a car but this is a purchase that I wish to make, its something that I will be keeping for at least 5 years and something im interested in personally and would enjoy alot. Its a high spec new car and not something that I would easily be changing!

Thankyou for all your comments, If anyone else has experiance of a similar rejection situation and have an idea why they were rejected please let me know...

Thanks for the honest comments, very refreshing. You want to spend the money you've earned you say...but you haven't earned it? You need to borrow to buy...and so it's all very well talking about what you work hard for etc...but you've not! I don't know why anyone works hard to buy the things they want, as you say. Personally I work hard because I love what I do and it doesn't seem like work. It's constantly exciting.

I suspect you're falling into a trap of desire, suppose I sound a bit like your mother, but it's just I've been there and now I see the trap I fell in...which is why I searched and found a site like this. I mean, I'm only 29 and I thought getting a 20k car was everything too... and in fact, it isn't. That's all matey! Good luck.:cool:

I now have much more fun making money from things I've learned on this site (like matched betting) than spending it...you seem like a sensible chap (I wish I had your sense at 23) so think about this carefully.

(Besides, what about other costs of motoring, tax, insurance (I bet that's not cheap), higher petrol prices, maintenance and so on.... a lot to take on?)

margaretclare

Really sensible advice, Paul. We should all work because we love what we do, not just to get money to buy 'things'. 'Things' do not bring happiness. A car is basically a metal box which gets you from point A to point B. It's convenient and it's more comfortable than waiting at bus stops. Otherwise, it has no value of its own. The thread above this is saying similar things.

Margaret

ArchieB_2

I doubt trying to convince people that materialism is the root of all evil will help in this instance (not that I don't aggree with the sentiment in the two posts above). I love cars and if I was that age, no kids, earning that money, then the £20K car would be on my drive!

S3quence - the fact you have an existing 9K loan and you are looking to add £20K to it may be a problem. Even if you tell the new loan provider that the £9k loan will be cleared, I don't think they will take your word for it and will be looking at this as if you would have £29k of unsecured debt simply on the loans - too much! I may be wrong, but it's worth asking the new loan provider how they view the existing loan.

Hermione54

The danger is that the novelty of the new car will wear off pretty quickly, and then you might want another one in 18 months, that can lead to a debt spiral of never ending new car purchases financed by credit, especially if your circumstances change.

Story of my life! LOL

S3quence

margaretclare wrote: »

We should all work because we love what we do, not just to get money to buy 'things'. 'Things' do not bring happiness.

Lol no one said I dont enjoy what I do, I do enjoy my job very much which is why I have worked hard to get the as much as i can out of it. At the end of the day WE DO work to buy things. I'm sure your typing from a computer / laptop now which you bought out of your hard earned money. It doesnt bring you happieness (well it might) but it serves its purpose. We work hard to pay our way though life (primarily) ensure bills are paid and we can eat etc... and also to buy things that we want. At the end of the day whats the point in saving as much as we can or paying it off the mortgage if we dont enjoy it. I'd rather spend a bit now and enjoy it. Different things do it for different people, some people prefer to go on cruises/holidays, go out for meals several times a week/month, play golf etc...mine just happens to be cars

albertross wrote: »

You will be very lucky to get anything near what you paid for it after 5 years, it will probably be worth 5k depending on the model. If you must, try dealdrivers for a bargain.

The danger is that the novelty of the new car will wear off pretty quickly, and then you might want another one in 18 months, that can lead to a debt spiral of neverending new car purchases financed by credit, especially if you circumstances change.

PS It's pointless having savings and an overdraft at the same time.

lol I do agree that the value will be alot less after 5 years, though part of the reason for getting the more expensive one now while I can afford it is that I dont believe I will be changing this one for at least 5 years+. I have had the finance before mainly because I left school and got a job (and earned about 11k) I needed the car for work and so instead of getting a loan for a cheap car. I got sucked into the low repayments (free insurance) loop and then after 3 yrs couldnt afford the balloon payment and instead of taking out a loan for this payment and paying it off I (stupidly) exchanged for another one. This time as i believe I can afford I wanted to do it so I have a really good car pay it off over 5 yrs then stick with it (after 5 yrs Ill still have a good car), I can prob save quite a bit as I wouldnt be trying to save lots to pay it off in one go.

As for the overdraft i may be wrong in thinking but they really dont charge anything. I think i got charged 0.38p one month when I was in between jobs and didnt have a salary that month so didnt credit. I just thought as my savings account is 6.x% and the over draft is nothing. If the money is earning (little) interest then its surely better than paying off the overdraft for nothing. Though I will now be paying this regardless.


My main reason for the original posting was more to find out why people thought they would reject me for what I saw as an affordable loan and what affect a rejection had on your credit rating (future credit attempts / remortgaging etc... lol another hurdle in 18months)

Ive not really used this site much but came across it though my girlfreind and am really pleased with the feedback people are giving. Im going thorugh a bit of a trying to save phase. Hence trying to pay everything off as much as I can and gather some kind of savings.

I can prob say that the car thing will happen wether its 12 / 18mths down the line but chances are I will be leaving it for at least 6mths to save as much as I can before then to reduce it anyway. Plus ive started (as of yesterday) overpaying on my current loan to to reduce that interest.

Anyways I think I had better get back to work...:o... before I get sacked and cant afford it anyway...(you know how it is Friday, month end, pay day, dress down, pub lunch.......)

S3quence

albertross wrote: »

Check the terms of your current account regarding the overdraft, students and ex-students sometimes get them free for a period, but many have to pay interest 15-20%.

I didnt go to uni so never had a student account

djwolf

margaretclare wrote: »

Really sensible advice, Paul. We should all work because we love what we do, not just to get money to buy 'things'. 'Things' do not bring happiness. A car is basically a metal box which gets you from point A to point B. It's convenient and it's more comfortable than waiting at bus stops. Otherwise, it has no value of its own. The thread above this is saying similar things.

Margaret

Sorry but I tend to disagree. I'm someone who very much enjoy cars and driving as it's a hobby of mine. I think if people are earning good money then fair enough if they want to buy a nice car. It's only like someone else having expensive holidays or nice things for their house. I do, however, think he would be wiser saving up some money first which wouldn't take too long with £1k spare each month. £20k just seems a lot to borrow in one go.