Personal loan for car

Legacy_user

I was wondering if you can take a personal loan out to pay off a hire purchase (HP) agreement so that i own it outright and what would it come under when applying (refinancing debt maybe?). I applied for a few personal loans but the rates were so high (15-20%) so I was thinking about going down the HP route (with a lower rate - I assume because it’s secured debt rather than unsecured) and after making regular payments for a bit to boost my credit rating (so lenders see me as a lower risk), I’d want to use a personal loan to pay the outstanding balance and own the car outright. Is this possible? Thanks.

Bigphil1474

It would be down to the lender. Personally, if I was applying online and it asked me for the loan purpose, I would put it as buying a car, as that would be the main purpose. Not sure how the formula works, but I suspect car purchase is a better bet for the lender than refinancing debt.

Mercdriver

I hope you were using the soft searches offered by MSE, Noddle and others. Otherwise it might be as well to wait it out for a month or three to allow these searches to come off your credit report.

System

I have run a few soft searches and applied for two online with best chance. I’ll wait at least three months and apply again to pay off finance (and hopefully after 3 months of regular payments will help my credit score so should be alright to apply again, unless you think I should wait longer?). Still not sure wether to put down as refinancing or purchasing a car when applying though.

Scrapit

Huw1234 wrote: »

I was wondering if you can take a personal loan out to pay off a hire purchase (HP) agreement so that i own it outright and what would it come under when applying (refinancing debt maybe?). I applied for a few personal loans but the rates were so high (15-20%) so I was thinking about going down the HP route (with a lower rate - I assume because it’s secured debt rather than unsecured) and after making regular payments for a bit to boost my credit rating (so lenders see me as a lower risk), I’d want to use a personal loan to pay the outstanding balance and own the car outright. Is this possible? Thanks.

Why, what's the advantage? Hp is essentially a loan which you are paying back at an agreed rate for an agreed term. The loan you take out to pay off a hp deal is no different. The hp on the car might be a better rate or vice versa but both are gonna appear on your credit ratings.

neilmcl

Scrapit wrote: »

Why, what's the advantage? Hp is essentially a loan which you are paying back at an agreed rate for an agreed term. The loan you take out to pay off a hp deal is no different. The hp on the car might be a better rate or vice versa but both are gonna appear on your credit ratings.

Because generally banks loans will be cheaper than car finance, that's why.

Mercdriver

neilmcl wrote: »

Because generally banks loans will be cheaper than car finance, that's why.

Plus if you do get into difficulty, the loan is not secured on the car. Of course if it were to get to CCJ stage and debtor doesn't pay, the car becomes a sellable asset, but this will take a lot longer than with a secured loan.

Scrapit

neilmcl wrote: »

Because generally banks loans will be cheaper than car finance, that's why.

At 15-20% as stated in the OP? :eek:Maybe a cash private deal would be better.

System

I guess because of my limited credit history a car loan (secured has a better rate at this point so after a a while I’ll have a good history of paying on time. Plus I want to own the car and personal loans usually do have cheaper rates (at least cheaper rates are advertised, wether you qualify if another matter) plus if I run into difficultly, the car is an asset I can sell to help me out but that’s difficult if you don’t own it.

Scrapit

Huw1234 wrote: »

I guess because of my limited credit history a car loan (secured has a better rate at this point so after a a while I’ll have a good history of paying on time. Plus I want to own the car and personal loans usually do have cheaper rates (at least cheaper rates are advertised, wether you qualify if another matter) plus if I run into difficultly, the car is an asset I can sell to help me out but that’s difficult if you don’t own it.

The above and mercdrivers posts aren't positives. If it's likely you are going to get in to difficulty don't commit to either a loan or a hp deal. How much apr are you being quoted on finance cos the personal loan rate is pretty steep.

dont_use_vistaprint

Yes you can, generally the personal loan is a much lower interest rate but the finance deal will offer other benefits and may have some restrictions or charges on early settlement. Iv'e done it once when deciding to hang on to car that was way over the mileage agreed , I still liked it and my income was significantly higher than when I took out the finance. It kept the payments nice and low for the first 3 years, then I outright owned it by doubling the monthly payment for another 2 years