Bank Hire Purchase vs Bank Loan and mortgages

JakLawrence

Hi!
My car is 13 years old now, has topped 110k miles and is a hot hatchback in a high insurance group - it's getting increasingly costly to keep on the road and the MPG is rubbish. Time for a new (used) car really I think, one I can keep for another 5+ years like this one. Looking to spend a good 8-10k on something decent in good nick, and would pay for it either with Lloyds Car Finance (3.8% APR) or a straight up loan (3.9% APR). I'm also going to be making an attempt within the next few years to finally get on the property ladder with shared ownership or similar, so this decision is now being framed in my head as 'which of the two is going to look least-worst on a mortgage application'?

Lloyds Hire Purchase is secured against the car (at least in theory?), a straight-up loan from Lloyds is not secured against anything. Do you think it's better to have secured finance in terms of getting a mortgage versus having a loan? Am I shooting myself in the proverbial foot regardless? Practically speaking I earn enough that I could easily afford to pay both from the calculations I've done, but experience has taught me some of these affordability algorithms only want you to apply if you're a Rothschild!

[Deleted User]

It'll make no difference.  The only thing or importance is how much extra debt you want to be carrying when you apply for your mortgage.

Clive_Woody

There are loans for that amount at lower APRs 2.8%. Whether you will get the headline rate or not I don't know.

https://www.moneysavingexpert.com/loans/cheap-personal-loans/#7.5k

JakLawrence

Deleted_User said:

It'll make no difference.  The only thing or importance is how much extra debt you want to be carrying when you apply for your mortgage.

Understood, so in theory the best thing I could do in this situation is get the ball rolling ASAP so the total amount outstanding when I do come to mortgage applications is as low as possible!

Clive_Woody said:

There are loans for that amount at lower APRs 2.8%. Whether you will get the headline rate or not I don't know.

I've been using Lloyds as a jumping off point since they are my bank, I haven't looked around much yet but I'll check out the MSE lists!

Nearlyold

Just to warn you some car salesman will tell you that Mortgage Lenders will ignore car HP agreements in assessing how much they'll lend you - it's not true.

It's not just the total you owe in itself that mortgage lenders take into account it's also the monthly commitment.

MinuteNoodles

JakLawrence said:

Understood, so in theory the best thing I could do in this situation is get the ball rolling ASAP so the total amount outstanding when I do come to mortgage applications is as low as possible!

If you're thinking of at least 3 years down the line, yes. If it's much sooner then keep what you've got or replace it with something cheap to run around in for a couple of years then get the new car after the new house.