Accepted for a loan - Credit Rating affected?

MAFFA

I'm looking to buy a new car with a £25k loan over 7yrs as the rates are so good. I have run an eligibility checker & I'm 90% likely to be accepted.


My question is that my 2yr fixed rate mortgage is up in August 2017 & if I was to re-mortgage then would my chances of getting the best deals be affected? My LTV is very good and there are some cracking deals out there that could be had when I re-mortgage to incorporate what's left of my loan then. I just wonder whether having a loan accepted will hinder my credit score & therefore hinder my chances.


I think what I'm effectively asking is am I better off waiting until I re-mortgage to buy a car? Life's to short sometimes if you know what I mean but I need someone with a sensible head on


Many thanks

[Deleted User]

Ignore any magical credit score. They don't exist.

Your only considerations should be affordability, in conjunction with your credit file. A £25k loan could certainly make a difference, particularly on a modest income.

Personally, I'd wait.

Pixie5740

If you have a low LTV and you're not going to be applying for a remortgage until August 2017 then I don't think taking a loan out now will do that much harm. Having the loan will impact your affordability but that might not be an issue since you have a decent LTV (I'm assuming 60% LTV or better.).

If you're thinking about spending £25k+ on a car there could be cheaper ways to do it than using a personal loan. For example, car dealerships make more money selling you finance than they do the car and so you can negotiate a larger discount on the car if you take the finance from them rather than financing elsewhere. You'd need to do the sums and work out which is the cheapest option for you which won't necessary be the option with the lowest headline rate.

MallyGirl

MAFFA wrote: »

My LTV is very good and there are some cracking deals out there that could be had when I re-mortgage to incorporate what's left of my loan then.

it is generally not a great idea to convert unsecured debt into secured debt - unless your LTV really is very low so that your home would never be at risk if your circumstances changed

Pixie5740

MallyGirl wrote: »

it is generally not a great idea to convert unsecured debt into secured debt - unless your LTV really is very low so that your home would never be at risk if your circumstances changed

Good point. I'd also like to add that just because the OP's mortgage might have a lower rate than the personal loan repaying the money over a longer term could make absorbing the loan into the mortgage more expensive.

MAFFA

Thanks for all the replies. My LTV is currently around 56% & affordability isn't an issue. I was a little naïve last year & accepted a re-mortgage with my existing lender as they offered me a relatively decent rate. I didn't get a valuation done when I should have so my mortgage rate is 2.99%. With my LTV the repayments on taking out a mortgage in August would be less than they are now whilst still taking out 25k for a car. I would like to think I could overpay the loan by a substantial amount before August & only need to re-mortgage by the amount needed to repay it. That may incur an interest charge but that wouldn't be extortionate. The loan rates offered by both Tesco & Sainsbury's over 7yrs are very good at the moment. 3.4%

Superscrooge

Tesco and Sainsbury's only need to give the headline rate to 51% of applicants so there is no guarantee you would get the headline rate.

An extra £25K of debt eight months before a remortgage isn't ideal. Whilst it might not effect your remortgage. Many borrowers are being rejected for improved remortgage offers on affordability grounds.

If I was in your position, I'd delay the new car purchase until you have sorted out your remortgage. It will give you something to look forward to for the next eight months

PeacefulWaters

Seven years for a car? I'd suggest it's likely that will stick you into a more expensive interest rate bracket.

Remortgaging to pay for a car? That just sounds insane to me. Are you planning to do this every time you replace a car through the term of the mortgage?

MAFFA

This would put me in the 3.5% bracket. The idea would be to pay off a large chunk of this by the time I come to re mortgage so that I would only have say 10k to take out of the house. I tend to keep my cars for 8-10yrs but would like to be in a position of having a relatively new car so that when the time comes to get a new one I could have the opportunity to save beforehand.


The other alternative is to take an additional loan out with my current mortgage company that has no early repayment fees & pay that off relatively quickly.