Personal loan offer was not at advertised rate

alstemp

HI - I am currently sourcing a personal loan for £18,500 over 4 years to fund a car purchase. Over the next 2 years I plan to make additional payments towards this.


i spotted a loan with AA at 2.9% and did the soft search and was advised I had 9.5/10 chance to be accepted. It did not specify at which APR.


So I went ahead and applied - although my application was successful it was at a much higher rate of 7.9%. I can manage the monthly payments at the 2.9% but this obviously makes a big difference.



My credit score is Good, 949. I have one other personal loan and some outstanding credit card balance.


i) is 7.9% likely the rate I'll get with other providers? There seems to be no way of checking what rate you get until you make a full applications (which marks your credit history). Are there any soft searches that include the APR you'll get as well? How can I get a realistic APR estimate?



ii) would I get a cheaper rate if I did finance through the garage finance provider (I don't want to do PCP, want to pay monthly and own the car outright).


Thanks in advance for any advice.

[Deleted User]

It sounds as if you'll be unlikely to get a market leading headline rate with a number of existing debts. Your score is irrelevant in credit decisions.

Set your sights a little lower. You may have more success.

financegeek

why do you need an £18,000.00 car when you're already in debt?

save up, pay off your other debts then buy a car you can afford to pay for outright.

System

alstemp wrote: »

So I went ahead and applied - although my application was successful it was at a much higher rate of 7.9%. I can manage the monthly payments at the 2.9% but this obviously makes a big difference.

Not on a per monthly basis it doesn't. Its less than £10 a week. The difference between an £18.5k 4 year loan at 2.9% and 7.9% is £40 a month in payments, £408 vs £448 a month. If a difference of £40 a month makes the difference between you being able to afford it or not then you've got some real serious financial issues and you cannot afford an £18,500 car or anything near an £18,500 car.

Dobbibill

Can you look at a cheaper car? Anything longer than 3 yrs for financing a car IMHO is too long.

You are never guaranteed a headline rate - make another one application if you want to check what you might get from another provider then make your decision.

Another thought is can you wait until your others commitments are paid off before taking on more finance - this still doesn't guarantee you a better rate but may not push your budget to be so tight.

worried_jim

£18k on a depreciating asset- madness.

sourcrates

alstemp wrote: »

is 7.9% likely the rate I'll get with other providers? There seems to be no way of checking what rate you get until you make a full applications (which marks your credit history). Are there any soft searches that include the APR you'll get as well? How can I get a realistic APR estimate?

The answer is you can`t.

Only once a lender has performed a full credit check on you, do they divulge the rate of interest, or the level of risk, they are willing to commit to.

51% of applicants must be offered the headline rate, everyone else gets a rate based on percieved risk, how this risk is determined is a trade secret, it could be the 51% quota has been filled for this month, you may not just quiet fit certain acceptance criteria, could be one or more, of 100 reasons.

Could be they think you have sufficiant debt already.

Do you really need to spend that much on a car ?

I have never spent more than £3000 on a car ever, and never would, maybe you should lower your expectations a little.

Ben8282

With an existing loan you are very unlikely to get a headline rate. on a second loan. The outstanding credit card balance will also affect the rate you will get, especially if not at 0%.

DrEskimo

Amount you spend on a car is, as everything, relative to your income. I personally would never put more than 50% of my household income into cars, since any more is too much money into a heavily depreciating asset.

I would also never finance them, or at most, never finance more than half of the cost. Adding interest to the other major running costs doesn't make sense.

enthusiasticsaver

The rate you will be offered is variable according to how the lender scores you (not the credit agencies score which is entirely different) and how credit worthy they judge you to be. If you already have outstanding debt and are seeking to increase this by a significant amount (which £18k is) then I think it likely you will not get a much better rate than the one offered. I would agree with others that you first of all should address your existing debt and that financing a heavily depreciating asset like a car with 100% finance is unwise.

WolfUK

I suspect the OP is looking at getting a Tesla Model 3 the same as me and the loan is the make up the difference from savings.

The car will deprecate but not as much as most people think. I also got 7.9% from the AA but 3% from Tesco over 3 years.

The only downside with Tesco is that they wont let you pay the loan of early without charges however they will let you make unlimited over payments. So this did confuse me as I could get the loan down to a very small amount say £50PM and pay very little interest.

Anyone have experience of this?