Declined a loan - need a car now. What should I do next?

unexploded

Hi all. I appreciate there are many of these threads but everyone's situation is unique.

Just applied for a £15k loan over five years at Sainsburys and have been refused. This is what they said:

The amount of unsecured credit (loans, credit cards and overdrafts) you have is relatively high compared to your income and this means that you don't meet our lending criteria

I'm a director, on about £20k pa. Being a director usually means it's very difficult when it comes to borrowing personally (it would seem being in the black as a company since you incorporated over a decade ago doesn't mean anything...), so I did the eligibility check and rang up Sainsburys beforehand to make sure I was in for a good chance, and that I was applying correctly. They said to apply as 'employed' and take 25% off my total dividends, and then submit my gross annual income.

Anyway, I've been refused for the above reason. I have 2k on a 0% balance transfer on a credit card. And a very affordable mortgage that my partner and I pay half each towards. Never missed a late payment. Never had problem with being accepted for credit before.

Credit checks: Experian says I'm 999 (excellent), Noddle says I'm fair to good, 3/5 (I was surprised at this one, and how different the two are).

Did I try to get too much money here, is that the reason?

I just had a car on PCP, bought it and sold on (always been accepted for PCPs). I'm now without a car, and looked at going second hand this time, hence the loan. Because of being refused I'm thinking I should be waiting a while now for trying to apply for a smaller amount on a PCP plan/lease, for example. But I need a car!

Do I risk it and try again another way, or just buy a banger with savings for now?

Appreciate any insight and thoughts, thanks

foxy-stoat

Just buy a secondhand car that you can afford with savings or a small loan.

If you pay yourself £20K plus dividends is the most economical way to earn money but when you need to prove your earnings to borrow money then it counts against you.

unexploded

Thanks xpc, yes of course, you're quite right - I was just making a snidy remark about how banks judge directors and self employed. I know plenty of 'employed' people who have a 'proper job' who get away with any credit as long as they have three month's payslips, yet run the risk of being made redundant the next day. Anyway...

Just to make clear here, I was taking a loan out over five years. A few grand a year is very manageable on my salary. Or am I missing something?

Not overly bothered about cars but I commute a bit more now so wanted something a little more economical, with a few bells and whistles!

unexploded

Just an update, I clarified with Sainsbury's and they told me the credit check was via Experian. The company that gave me an excellent credit rating. Cray cray.

sourcrates

unexploded wrote: »

Just an update, I clarified with Sainsbury's and they told me the credit check was via Experian. The company that gave me an excellent credit rating. Cray cray.

Just shows how meaningless credit scores can be.

As a side note, you can pick up a decent mk1 Audi TT now for less than 2k, cheap as chips, but a whole lot of motor.

DCFC79

unexploded wrote: »

Just an update, I clarified with Sainsbury's and they told me the credit check was via Experian. The company that gave me an excellent credit rating. Cray cray.

The scores mean naff all, lenders don't see them, they see the history. All that matters is your history is correct.

foxy-stoat

unexploded wrote: »

Not overly bothered about cars but I commute a bit more now so wanted something a little more economical, with a few bells and whistles!

You dont need to spend £15K on a car then, aim a little lower price wise and get a loan for that - you should be able to get a loan for £6-7K

unexploded

Interesting little bit of info I've just found, that I can't see on other credit reports.
Signed up to ClearScore (Equifax?) and it shows a 'loan' for a four figure sum. This is actually the amount for the PCP on my previous car, which I settled this month.

I wonder if this is causing an issue. Perhaps I'm being naïve here but I assumed this would have been stated as paid off already.

Foxy-stoat, let me rephrase. I'm not too picky, not mad about cars, but I didn't want to buy a banger car that turns into a moneypit. That kind of money can get me a nice enough car for what I need, with a good chunk of the devaluation considered, while having enough time in that car before expensive repairs inevitably start.

Gaz83

unexploded wrote: »

Interesting little bit of info I've just found, that I can't see on other credit reports.
Signed up to ClearScore (Equifax?) and it shows a 'loan' for a four figure sum. This is actually the amount for the PCP on my previous car, which I settled this month.

I wonder if this is causing an issue. Perhaps I'm being naïve here but I assumed this would have been stated as paid off already.

They don't update right away.

unexploded wrote: »

Foxy-stoat, let me rephrase. I'm not too picky, not mad about cars, but I didn't want to buy a banger car that turns into a moneypit. That kind of money can get me a nice enough car for what I need, with a good chunk of the devaluation considered, while having enough time in that car before expensive repairs inevitably start.

As you've found, however, no-one has a right to receive credit. You can't force a lender to lend you money. If you're not going to get £15k, you need to re-evaluate what you actually need.

OA234

I suggest you check your credit file on all 3 credit reference agencies. There might be information missing or wrong that is causing the issue.

I just took out car finance with AA Car Finance - for about £13,000 per annum at 7.5 % Interest per annum. I went through confused.com though.

You may want to check them out and other car finance comparison sites - for a soft search first. Also, after checking your credit file, if there is information that has not reflected yet, e.g, a loan that has been paid off, I suggest waiting till it reflects, then, re-applying for the car finance - if you want one.

Bermonia

Would seem likely that your previous loan is still being considered against you - also I note you say you only have £2k on a 0% card, however what is the total limits on all your cards (even) unused as lenders will also consider the ‘potential’ for those to become debts/liabilities