New to personal loans, want some reassurance

jimmythegent

Hi All,

Looking at getting a loan to buy a car I really want as a treat. Been looking at a £5000 loan repaying over 3 years which depending on the interest rate works out about £150/mo, no problems for me. I do have some questions however as I;ve never borrowed money before and am a little anxious given i'm the old school of never having bought anything I couldnt pay for in full.

Firstly, I looked at my bank website (HSBC) who on a quick calculator offered a 6.2% interest rate, then there was a link to M&S loans who offered the same terms but for 4.something %. It looks like I can get a better deal online through some of the comparison sites but how do I know what is good and bad? Also I haven't had a mortgage or credit card debt so would I be considered a bad credit rating?

Secondly, I may be moving abroad in 2 years with work, so in that case would sell the car and repay the loan early, are there any issues with this?

Just want some general positive (if so) advice too as I'm trying to convince myself to take the leap so to speak, cheers.

TadleyBaggie

Those 4% deals are not offers, unless you have a spotless credit record you will probably be offered a much less favourable rate.

TadleyBaggie

Having no previous credit is almost as bad as having a bad credit record.

Foxy-Stoat_3

I would choose a 24 month repayment rather than 36 months for a £5K car.

No credit = bad
Bad credit = bad

You will struggle to get the best interest rate deals.

Good luck.

jimmythegent

Thanks guys, I did suspect that having no CR would be worse than a bad one, I'll shop around and have a look today.

Lovely that for being an honest Joe and not living outside my means I get a crappy CR though!

CLAPTON

jimmythegent wrote: »

Thanks guys, I did suspect that having no CR would be worse than a bad one, I'll shop around and have a look today.

Lovely that for being an honest Joe and not living outside my means I get a crappy CR though!

No you don't get a crappy credit rating because you live within your means :
you get one because you don't understand how the system works.

-if 150 per month repayment is no problem then why haven't you saved sufficient to avoid getting into debt for a car?
-if you sell it is two year you will lose a load of money in depreciation


if you want to build a decent credit record then get a credit card: use it only for things you buy anyway (food, petrol) , and pay in full each and every month
-this will give you an excellent credit history, cost no interest, means you live within your means, and later you can get CC with actual positive benefits etc.

if you are going abroad and ever intend returning, now is the time to get the best bank account and credit cards as it may be much more difficult when you return from abroad.

Gaz83

jimmythegent wrote: »

Thanks guys, I did suspect that having no CR would be worse than a bad one, I'll shop around and have a look today.

Lovely that for being an honest Joe and not living outside my means I get a crappy CR though!

Start with your own bank. If they can see that you have a regular wage being paid in and a surplus of spare cash each month they'll possibly treat you more favourably than someone who's never had a financial relationship with you.

downhillfast

Before applying for anything I'd be tempted to sign up with Noddle (free) to have a look at what they think your credit history is... it will at the very least show if you are on the system ie on the electoral roll. You say you have never had a credit card or borrowed money but have you ever had a phone contract? This will be something positive if so.

Once you're happy that the CRAs (Credit Reference Agencies) know you at least exist you can then look at approaching someone (probably your own bank to start with) for a credit card to build a more substantial history.

jimmythegent

Thanks for all the replies:

CLAPTON wrote: »

No you don't get a crappy credit rating because you live within your means :
you get one because you don't understand how the system works.

-if 150 per month repayment is no problem then why haven't you saved sufficient to avoid getting into debt for a car?
-if you sell it is two year you will lose a load of money in depreciation

Ok, makes sense. I thought credit ratings were based on people who only bought lots of things on credit cards and took years to pay them back, or people with a mortgage, thanks for clearing that up.

Just to clarify, I never said I've never had any credit cards. I do and have used them, but I only use them for online transactions or when I go on holiday and the highest monthly bill I have ever had as £500 one time after a holiday. It got paid in full when I got back. Also, this is not an 'in debt for a car' issue. I've just chosen to spend money on things other than new cars but the car I'm looking to buy is a friends specialist sports car and it won't depreciate much if at all. I could have easily spent 5 years saving up for a new car but I didn't want one so have enjoyed my life in other ways.

Gaz83 wrote: »

Start with your own bank. If they can see that you have a regular wage being paid in and a surplus of spare cash each month they'll possibly treat you more favourably than someone who's never had a financial relationship with you.

Had a quick look this morning and think that's the best conclusion. My bank manager is a family friend too so that might help.

Thanks all.

downhillfast

jimmythegent wrote: »

Just to clarify, I never said I've never had any credit cards. I do and have used them, but I only use them for online transactions or when I go on holiday and the highest monthly bill I have ever had as £500 one time after a holiday. It got paid in full when I got back.

In that case then I would look at applying for a whichever loan offers the best rate... if you don't get it then go to your own bank. For £5k you could also consider looking at 'super transfer' credit cards (not to be mistaken for balance transfer cards) as these cards allow you to transfer 'cash' from the card to your current account for a small one off percentage and then have interest-free periods over the kind of term you are thinking.

http://www.moneysavingexpert.com/loans/cut-loan-overdraft-costs

jimmythegent

Thank you