Loan rate difference

lexi

Hello, As I am with them I have just been to the Nationwide who advertise a 3.6% rate for existing customers for loans £7500 - 1499.
After a few question I was quoted:
8.9% for £8000 over 5 years
9.9% for 10000 over 5 years
I was a bit shocked as I thought I would be at least around 5% or even 3.6% as I have no mortgage, in FT employment, no children under 18, no bad credit, but do have a car loan on finance, of which is paid on time each month.
Even the adviser said although she cannot say if things are a good deal or not, was a bit shocked that the rate was so high.
Does anyone know if the car finance is the problem here? I would like to go to another bank/BS but if this is what I am likely to expect, I wont bother.

19lottie82

How much is your outstanding car finance, how much is your salary and how much have you applied to borrow?

lexi

Thanks Lottie
I have 2 years left @ £200 PCM
£18000
£8000

19lottie82

lexi wrote: »

Thanks Lottie
I have 2 years left @ £200 PCM
£18000
£8000

Ah. There lies your problem. You want to take out over 2/3 of your annual salary in debt. That's VERY high. I'm surprised you've even been accepted tbh. As a rule of the thumb most lenders don't like you to have more than 50% of your salary as a total.

Do you mind if I'm nosey and ask what you need the 8k for?

lexi

Sorry Lottie, I don't quite get what you mean....


You want to take out over 2/3 of your annual salary in debt.


Would it make a difference if I used both mine & my hubbys salary then? I asked the girl in Nationwide & she said it all depended on whether he was already 'loan approved!'
Its just annoying that I only have 1 loan @ £200 & want another one at around the same cost ( or lower) & they offered such a high rate...at least I know why now.
Its for a conservatory/sunroom for additional space, as I cant afford an extension. Its not vital I get one, but would be nice.
Thanks for your help

19lottie82

lexi wrote: »

Sorry Lottie, I don't quite get what you mean....


You want to take out over 2/3 of your annual salary in debt.


Would it make a difference if I used both mine & my hubbys salary then?

Your salary is 18k, you want to borrow 8k and you have £4800 left on your car finance, so that's £12,800 debt on an £18,000 salary (more than 2/3) , which is very high.

It may bring the apr down if you apply jointly with your husband, it may push it up. No one will know until you apply, but bear in mind that repeated loan applications will have a negative effect on your credit rating.

19lottie82

Your other posts say your husband and yourself both have money in ISAs (sorry for being nosey!). If you have enough, Why not use this instead of taking out a loan? It's financial madness to pat interest on a loan when you can "borrow" the money from yourself, interest free!

lexi

Yes you are right. The only thing is you never put it back & I just keep thinking if all goes wrong I can pay with my Isa. It is a thought to be honest. I just hate having no back up as it were....thanks for your advice

27col

lexi wrote: »

Yes you are right. The only thing is you never put it back & I just keep thinking if all goes wrong I can pay with my Isa. It is a thought to be honest. I just hate having no back up as it were....thanks for your advice

Not sure why you think that you wouls not pay yourself back. If you have the willpower to save into an ISA then all you need do is is to set up a regular payment into your ISA to repay yourself. If the money is transferred automatically every month you probably won't even notice that it's gone from your current account.
It's madness to pay interest if you don't have to. Especially as ISA's are getting such poor interest rates at the moment.