Car loan application accepted, but APR is far too high!

gazzaman28

Hi all,

I've been tentatively looking to change my car. I have about £4k left to pay on the current HP deal (£240pm until October 2024), so taking into account paying that off and getting a newer car, I applied through M&S for £18k over 6 years, with the base APR at around 5%. I was accepted, but with the APR increased to a whacking 13.9%, which makes the monthly payment a lot less affordable for me, so much so that I'm going to not sign it and instead hold off for a few months at least.

My current thoughts are that I could in theory later this year pay off the current car HP from some savings I have, which would immediately increase my disposable income by £240pm. So if I was to do that, how soon after that should I wait to apply for another loan in order to (hopefully) get a better deal?

Thanks

MorningcoffeeIV

Start by checking your credit files.  4k isn't a large debt so the high rate won't be entirely down to affordability, although if your income is low, it will be a bigger factor. 

See what else may be making you high risk.

gazzaman28

MorningcoffeeIV said:

Start by checking your credit files.  4k isn't a large debt so the high rate won't be entirely down to affordability, although if your income is low, it will be a bigger factor. 

See what else may be making you high risk.

I have a couple of credit cards with just under £8k between them, being paid off at around £400pm. As much as I'd love to clear them quicker, I have a just shy of a couple of years to run with them.

Income is £26k salary plus another £5-6k in Airbnb rental income (not the same every month, but fairly stable across the whole year). Mortgage is £389pm (about £62k left to pay).

So yes, I guess they aren't looking favourably at the level of debt compared to income. Maybe applying for a loan under £15k will help, which clearing the HP would enable, rather than borrowing more just to pay that one off now.

And yes I will check my credit files, it's been a while, it just always feels like a massive nuisance to have to invest so much time and effort dealing with other companies who hold such important data about me!

MorningcoffeeIV

£15k is a huge amount for a car on a moderate income, especially with your other £12k of debt. I would consider clearing the HP and buying something for cash from your savings.

That would make you significantly wealthier, as well as making you far more attractive for any future borrowing needs. Your future self would be eternally grateful.

Also get the card cleared by paying as much as you can, and shifting them to 0% if you can and they're not already.

It only takes minimal time and effort to check your credit files  - and it informs you as to your likely options.