Loan to consolidate and get new car, advice

forestcub

Hi,

I’m looking for some advice as needing a new car due to spending out a lot (half the cars worth etc) the past year but also wanting to consolidate some debt (credit cards, overdraft) at the same time.

I’ve got about £5000 in debt I wish to consolidate (as I just want to make it easier to manage with one payment) - I’ve been transferring balances etc for a while and getting there but sometimes end up using cards when needed but I’d rather not have them around to avoid using at all. 

I also want to spend out about £7000 or so on a decent used car to last me (this is personal to me and feels like a good amount to spend, I’m fed up of fixing cheaper cars)

an accountant friend has advised a loan with low interest is best but also wondering if it may be better to do car finance and just keep paying off and moving balances (which is a bit of a headache tbh) or get a loan for solely the debt? 

any thoughts are appreciated. Also I don’t mind paying a loan back over 4 or 5 years as I have a stable job and also other income. 

Thank you 

[Deleted User]

It very much depends. 

You'll be asking for a total of 12k debt, which may be a lot, depending on your income. You then have to factor in whether you can get further borrowing and at what rate. Carrying long term debt and being in your overdraft puts you in the higher risk category.

Additionally, you need to know that you can curb your spending and not keep using the cards to run up further debt. 

A visit to the DFW boards may be best as a starting point. 

tacpot12

You might have to spend a lot to fix a £7,000 car. There are no guarantees with cars. My feeling is that you can get a good car for £3,500.

 It isn't clear whether your existing car is still viable, and it seems like you want to spend £7,000 on a car rather than being able to spent £7,000. This is ringing alarm bells with me. 

DrEskimo

Is there anything currently wrong with the car? You say you've spent half the cars value this year, so surely it's worth keeping it now given the expense?

Consolidation is rarely advised as typically it leaves people in more debt, particularly given you want to also more than double your existing debt to buy a new car.

As above, long term you will be far better off financially if you can get out of the mindset of using credit to fund your lifestyle and get into the habit of budgeting and saving for things. The DFW boards are an excellent place to help you reduce your spending, set up an accurate budget, and allow you to save and reduce the need for credit in the future.

This is how you can truly build wealth and reduce the financial risk that comes from borrowing.

Chris_English

This sounds like it could be the first steps down the road to being in a very bad place.

You have no savings towards a new car, you have significant debt, but want to take out additional borrowing.

If you are already living beyond your means (you are, you have debt) then where will you find the money from each month to repay your loan? DO you already know which spending you are able to cut down?

If you do, why not start by doing that now to see if it's sustainable?

forestcub

Thanks everyone. 

It’s mainly because the type of car that suits my work seems to be at around the £7000 mark with reasonable mileage. 

My car is small and lots doesn’t work anymore which has been a struggle over winter so really it’s not making me feel safe to drive on long journeys so I need something that does. I have shopped around but hard to find what I need for less without a ton of mileage. I appreciate that all cars need fixing at stages but it’s just frustrating at the rate it was happening. 

I don’t use cards to fuel my lifestyle, it was mainly to help at times when needed but really I could’ve probably sold things etc to get the funds. 

I’ve had a good look at my budget but as you say it’s just finding what works best. Maybe it’s better for me to get finance on a car then and keep transferring balances if needed whilst paying off my other debt. 

Thanks for the advice

forestcub

Also not sure what DFW board is if anyone can clarify? Thanks 

Superhoopza

Chris_English said:

This sounds like it could be the first steps down the road to being in a very bad place.

You have no savings towards a new car, you have significant debt, but want to take out additional borrowing.

If you are already living beyond your means (you are, you have debt) then where will you find the money from each month to repay your loan? DO you already know which spending you are able to cut down?

If you do, why not start by doing that now to see if it's sustainable?

OP being in debt does not mean they are living beyond their means. You don't know if this is an ongoing problem, perhaps the OP has reduced their debt recently. 

DrEskimo

forestcub said:

Thanks everyone. 

It’s mainly because the type of car that suits my work seems to be at around the £7000 mark with reasonable mileage. 

My car is small and lots doesn’t work anymore which has been a struggle over winter so really it’s not making me feel safe to drive on long journeys so I need something that does. I have shopped around but hard to find what I need for less without a ton of mileage. I appreciate that all cars need fixing at stages but it’s just frustrating at the rate it was happening. 

I don’t use cards to fuel my lifestyle, it was mainly to help at times when needed but really I could’ve probably sold things etc to get the funds. 

I’ve had a good look at my budget but as you say it’s just finding what works best. Maybe it’s better for me to get finance on a car then and keep transferring balances if needed whilst paying off my other debt. 

Thanks for the advice

Adding car finance on top of your existing budget and debt obligations is just going to stretch you even further. It will also hamper you ability to transfer any balances, potentially leaving you vulnerable to paying very high interest debts.

I appreciate why you want a new car, but it doesn't sound like you are in a position to change right now. Besides, what would happen if the new car also developed faults? Where is the money coming from to maintain this given your increased debt obligations?

I would strongly advise you to persevere with your current car, look to reduce your outgoings and set up a plan to tackle your debts and begin saving for a replacement car with cash.

forestcub said:

Also not sure what DFW board is if anyone can clarify? Thanks 

Debt Free Wanabe board.

https://forums.moneysavingexpert.com/categories/debt-free-wannabe

forestcub

Yes thank you, debt has been reduced. Obviously the past two years have been up and down for everyone but my income is growing and stable so I have budgeted.

Obviously I didn’t give lots of detail so easy to judge. This includes many things and I don’t have a materialistic lifestyle (so don’t use for casual spending). I had paid a lot off my debt and because of lockdowns I had job losses and this was what was available at times when I needed it and I am actually greatful for that. As said I’m just looking for advice and all is appreciated.

I’m on the up in many ways and very happy to say so, just looking for a solution that works moving forward. Wether paying off and carrying on but regardless my car will need replacing soon! 

Have posted in the other board so thanks for that one 

MattMattMattUK

You can get a decent car for half of the £7k you are looking for, but if you are in a position to, I would personally wait another six months, firstly to pay off more debt, but also second hand car prices are vastly inflated at the moment and are expected slowly come down this year. To give you an example my Golf (2009) was worth £3.5k in Jan 2020, I was looking to sell it and buy a Golf GTE, luckily I didn't as my income got totally hammered with Covid (It went from £120k pa to £18k pa), but my car is now worth around £6k, so a third more than it was two years ago, with another 10k on the clock. 

I'm not materialistic either, which is why I don't drive a newer car, I will drive this one until it dies, then probably buy another car and do the same for another 10+ years, I am fairly sure that I can keep this one going until I can afford a decent hybrid, or a good electric if options work out. 

Another thing to have a look at if you are trying to save money is what kind of work you are paying to have done, a lot can be done yourself, I changed my own pads and discs last year, it was easy to do from YouTube videos and cost me a lot less than a garage would have cost even with needing to buy a few tools to do it. Other bits, I did a mini service, changed the pollen filter, bulbs, changed the window motor on my sister's Q7, most stuff is a lot easier than you think, unless it is major mechanical stuff.