Loan ratio to income

Panny22

Hi it's been a long time since I've applied for a loan but am wanting to consolidate some debts from cc and get a car. Credit file has no bad marks etc always make payments on time I just want to get a good car as I drive so much for my job at night so want reliability and economic motoring. I earn 22k a year and prob would look at 25k loan in total. Dealer rates for finance are very high and by consolidating all would be saving around 390 a month would I have a chance of this or are loans worked out on a percentage of income. Thanks

molerat

You already have debt so they will look at your loan as adding to that debt. £25K + £? against your £22K salary is unlikely to be approved.

Panny22

Ok thanks debt is 11k. I was just wanting to look at consolidating to save money in long run but if not possible will have to decide if I want to take the dealers rate. Thanks for replying

Nebulous2

Spending £14k or so on a car cannot be described as 'economic motoring.'

Your £11k would be seen as the upper-end of what you could sensibly borrow, without any additional borrowing.

It's a good idea to pay a car over no more than the period of time you would intend keeping it. Never mind the monthly payment, what are your plans for repaying it all?

Panny22

I would be looking to repay over 5 years as I would be keeping the car for this length of time although through working out my budgeting I would also save some of the 390 to make additional payments to clear it earlier. My other reason for choosing a new car is that I drive roughly 1200 miles a month for work and when checking out new vehicles would also save on fuel. Unfortunately moving closer to work is not an option at this moment in time as I have a very unwell mother for whom I am a career.

I appreciate your reply.

molerat

You can get a reliable new or nearly new car for half that amount. Paying for a car, especially one which will clock up a fairly high mileage, over 5 years is madness - 3 years is a sensible car loan term. You also need to sort out why you have £11K of existing debt and address that before you take on any more.

andyfromotley

Hi Panny,

as said its really unlikely given your salary. Also when doing your calculations you would find it very hard to get anywhere near the best rates that are being offered.

I know its not what you are after but a better plan might be

1. transfer as much debt as you can to 0% credit cards and overpay them like mad to get them paid off.
2. Buy the cheapest car that serves your needs or make do with your existing.

in a couple of years you will be debt free and then if you want you can buy the car of your choice.

If that sounds like a possibility get yourself over to the DFW board where you will find tons of advice. Hope this helps, andy.

uncreative

It looks like you are already reaching the limit of your debt at 50% of your salary. Car finance is slightly different in that you could typically pay a higher rate over a longer term and the finance has some security over the asset (ie the car) so its "SLIGHTLY" easier to obtain than an unsecured loan.

But it doesnt sound like you need £25k? you can get a brand new car for £8k with full warranty, or plenty of decent second hand ones for £5k. There is even a Nissan Primera 2003 plate with 47,000 miles one owner for £895 within 30 miles of me on autotrader so there is bound to be some similar deals near you. Check out the motoring board on here for more advice on the car angle of your question.

The answer is never to take on more debt.