Car finance & Personal loan help

domevans8

I bank with Lloyds and they offer Car finance for cars under 10 years old, as well as personal loans. I'm in a slight predicament and I am not sure what to do, any financial advice would be really appreciated..
I am currently being offered a £7000 car finance loan at 3.8% APR and a personal loan at 14%, I am 23, financially stable and steadily saving for a house (credit scores range from above average to perfect depending on the credit app, but I have no black marks). I am unable use car finance to purchase my dream car, as it is too old, and with it becoming a classic the prices beginning to appreciate. I feel that now might be the only time for me to realistically purchase it, however there a few newer cars that I am still interested in for the time being. 

If I were to take out car finance with Lloyds now, (7000, 36 months, 3.8%), could I monitor the lloyds personal loan APR and once it is lower, take out the personal loan, and settle the car finance? Is this something I could realistically do? They state personal loans can be used to consolidate other debts, this would allow me to sell the car I financed, and use that cash to purchase my dream car.

I have a few concerns:
1, is that due to the car finance, I may be looked at less favourably (more money leaving my account, debt etc) until I've paid it off completely. I.e., will taking out the car finance make it less likely for the personal loan APR to come down?

2, Lloyd's rejecting the personal loan application, due to the car finance being through them and not wanting to lose out on the interest from that loan.

Any help appreciated
Dom

foxy-stoat

You wont get 3.8% loan for debt consolidation - at the moment the only loan they will offer at the moment for a car purchase is 14%.
You may not get a £7,000 loan on top of the £7,000 car finance as the lender will see you having £14,000 of debt, even though you promise to clear the first £7,000 debt.

I would save up now and use savings to buy your car, with a smaller loan perhaps or use money transfer credit card and do the balance shuffle for a few years, if your disciplined enough.

domevans8

Thank you for your help! I didn't realise interest varied for different purposes. Interest rates for loans under 7k are significantly higher too at the moment, and I end up paying a similar amount of interest. So 14% is the lowest rate offered at the moment? I'll try and take that as a positive
And how would that work.. can I take balance from a credit card into my current account? Would that not damage my credit score using a lot of my available credit?

Thanks
Dom

[Deleted User]

14% is the lowest you're being offered because of your higher risk levels.  Lower risk applicants get much lower rates.

A money transfer card is an option but you're unlikely to get it in your circumstances.  Before applying anywhere, have a good look at your credit files to see what appears.  Ignore the credit scores - they're not used in lending decisions and are only provided for entertainment purposes. 

Then try an eligibility checker to see what your options may be.

foxy-stoat

domevans8 said:

Thank you for your help! I didn't realise interest varied for different purposes. Interest rates for loans under 7k are significantly higher too at the moment, and I end up paying a similar amount of interest. So 14% is the lowest rate offered at the moment? I'll try and take that as a positive
And how would that work.. can I take balance from a credit card into my current account? Would that not damage my credit score using a lot of my available credit?

Thanks
Dom

MT to your account and pay for the car.  BT once your intro period is nearly up.  Make the same payments as  you would the 14% interest loan - dont pay the minimums or you may end up with the interest going into the standard high interest rate.

Forget about your credit score - it is only seen by you.

domevans8

Thanks for the advice, however the first reply stated the lowest APR they offer for car purchase is 14%? This time last year I was being offered around 8%, so I presumed the higher rate was due to the current climate.

How would I see my credit files? I have the Clearscore, Experian and Moneysupermarket apps. Clearscore seems to give me the most information and all of it is positive, everything is labelled as 'on track'. How can I see more?

I've used all the different eligibility checkers, the lloyds one says I'm very likely to be accepted, but for 14%, and then there have been various other banks having 90%+ eligibility at 3.8% Apr representative, but I just assumed that the actual rate offered would be around 14% anyway.

I do have a credit card, is a balance transfer one different?

foxy-stoat

How much more do you want to see?  Credit Karma, Experian, Equifax, am sure there are others.

MT and BT are offers on credit cards - if you have 1 card and no offers try applying for one with a MT option.

[Deleted User]

domevans8 said:

Thanks for the advice, however the first reply stated the lowest APR they offer for car purchase is 14%? 

No it didn't.  It stated that there was no way you'd get a consolidation loan for 3.8%, when the lowest you're being offered for a car loan is 14%, which is much lower risk.

The current higher rate is due to your high risk levels.  

You check your files via Clearscore, MSE Credit Club and Credit Karma.

A balance transfer is something offered by some credit cards, but not all.

enthusiasticsaver

Any borrowing you take out will impact on the amount you can borrow for a house.  I would save up for a dream car or if you need one get a fairly cheap one to get you going until you have saved up enough or have your house. 

domevans8

I see, thanks for the help. I had a quick look on my lloyds app and it appears I can use money transfers. So would I money transfer as much as I need, pay off as much as I can in the low interest period, then get another credit card and transfer the balance to that one etc.?

ace33

How soon do you expect to be buying a house and how often do you use a car?
This loan could have a big imact on your future house purchase.
Is it worth stretching your finances and locking in a high interest loan?