Personal Loan for a car - offered rate 6.5 times the advertised rate?

kilotopy

Hi,
So I have been eyeing to buy a new car and wanted to go down the personal loan route. The sum I have in mind is 20k over 5 years.
I am a software engineer with decent salary and not too many expenses (no dependants, mortgage in place for less than 600 a month, have no debts or credit card bills (in fact, the mortgage is the only loan i have ever taken), etc). Basically, I am easily able to save a 1000-1200 per month.

So I looked around to find some good loans and the best I could see was cahoot advertised at 2.9%. So I applied and got approved... at a rate of 18.9% which they can shove it right where the sun doesn't reach. I mean, I understand the 2.9% is illustrative and they adjust the rate to your personal circumstances, but I would have expected this to go by magnitude of a single percent or so, not 6.5 times over advertised rate.

I am willing to try with someone else, but since I don't want to make too many applications not to have an adverse effect on my credit score. So hopefully you guys can throw in some good recommendations of who to go with so they won't try to rip me off. Or do you reckon it's gonna be the same with all companies?
I'm certainly not going to pay short of 20% Apr for what is essentially a luxury item (I wfh and my current car works fine, was just looking to upgrade), but I am really shocked at the number that came back with. So looking forward to hearing some options and recommendations.

Thanks

TadleyBaggie

A thin credit file is probably the reason. If you can save up to £1200 a month, why don't you have the savings, or at least a significant chunk of it,  in place to pay for it outright?

kilotopy

TadleyBaggie said:

A thin credit file is probably the reason. If you can save up to £1200 a month, why don't you have the savings, or at least a significant chunk of it,  in place to pay for it outright?

Well, first and foremost the car I'm looking to get is 30k, so I'd be using 10k of my money. Second of all, for the past year and a half I have invested around 30k for a property (technically half of a property as im going halfsies with my dad) in my home country which is still under construction and should eventually yield around a 10k return on the investment early next year. So yeah, it's a bit complicated.

A question to you and perhaps a wider public. If I have a pre-approved rate at 3.1% (from mbna) is it going to actually be guaranteed if I apply?

Brie

It might be a case of having to take finance on the car where you buy it.  I dislike the pushy financing done by a lot of car places and it always has seemed they don't know their head from their elbow when it comes to advising correctly on the costs but if that's the only way to get the car you want it might be worth checking out.  

I normally suggest that people use their credit card for buying a car - it helps if you have 2 cards, one having a 0% balance transfer deal, as you can then get very cheap finance and pay things off as it pleases you.  But that doesn't look like it would work for you.

kilotopy

Brie said:

It might be a case of having to take finance on the car where you buy it.  I dislike the pushy financing done by a lot of car places and it always has seemed they don't know their head from their elbow when it comes to advising correctly on the costs but if that's the only way to get the car you want it might be worth checking out.  

I normally suggest that people use their credit card for buying a car - it helps if you have 2 cards, one having a 0% balance transfer deal, as you can then get very cheap finance and pay things off as it pleases you.  But that doesn't look like it would work for you.

Thanks yeah my credit card limit wouldn't cover that and another fact is that I might likely purchase privately not via a garage (the car I am going to see is a private sale) so I wouldn't be able to arrange financing there.

Having said that, I applied for mbna finance for same terms (20k, 5y) and got 3.1% as advertised, so looks like I got what I wanted after all:)

maz895

Hi , I’m looking to the same , car is around 19k. I have a mbna credit card so was sent an email Invitation with the same rate as yours…how long did the whole process take. Did you receive the loan in a few days ? Did thy have to provide any proof of income etc . Thankyou 

Orchid96

Hi @kilotopy,
Have you tried this link - https://www.moneysavingexpert.com/eligibility/loans-calculator/search/ ?
I think it gives 2 options, where first is the guaranteed rate (successful applications will be around 50%) and the second is more successful application rate but the rate is not guaranteed (which you got with cahoot). I used the first option as I wanted a guaranteed rate and took the risk of rejection. It worked for me when buying the car.