Looking for advice

Nasqueron

baser999 said:

Nasqueron said:

baser999 said:

Shakin_Steve said:

You may have issues with affordability tests quoting those figures. You are effectively using all of your spare cash each month to pay off a loan, which the lender may think is a tight squeeze.

I didn’t think it would be an issue. As I said, we cover our monthly bills and surplus monies are moved from current to a savings account and NSI by way of standing order. I’d cancel those SOs thereby increasing the monthly surplus to cover the loan. The bank can see what I already have in the linked-savings account and if needs be can be made aware of the other funds, all of which are in instant access savings accounts.

The trouble is, while your logic makes sense to you, banks don't see it that way. Savings cannot be used as "income" or as security for the loan for borrowing purposes. You could take the loan and then go on a 6 months cruise the day after and spend your savings in an instant. Use your savings, do not take a loan out and pay interest at what will be a higher rate than you earn on savings i.e. you're wasting money for the sake of having more in a bank

Went on-line and the loan has been agreed in principle. Basically just need to say if I want to go ahead with it. Car still at dealers going through servicing, prepping etc so no final decision made.

The problem will be (the idea of paying interest in order to lose money on savings aside), declaring actual income and if they ask for proof when they do a hard check. Again, drip feeding savings into a bank is not income for most providers (check their terms) and if you claim it as income on an online form (where the provider says you can only count a job, pension, benefits), you are committing loan fraud

MEM62

Nasqueron said:

MEM62 said:

Borrowing money to buy an asset with a value that falls like a stone is unwise, particularly so when you have the cash available.  Leaving it in the bank might give you more emotional comfort but it gives you the worst financial outcome.  'Borrow' the money from your savings and replace it with a monthly payment equivalent to what your repayments on the loan would have been.  If an unforeseen emergency crops up that costs you more than the £11k you have left to sort you might have to borrow to cover that.  However, being realistic that is unlikely to happen.    

It's a second hand car, the value "dropping" is not something anyone should get stressed over, you buy something, you use it, it's worth less than it was before. Unless you're buying an older car and think you can sell it for a paper profit in 10 years, no-one should care about depreciation. You get your money's worth from using the car

The point is by borrowing to fund the purchase, not only are you taking the hit as you drive your nice shiny car off the dealer's forecourt, you are paying interest on that immediate loss.  Financially, that's nuts.  Depreciation cannot be avoided but paying interest can.  Of course, the older (and lower value) the car, the less of an issue.    

Nasqueron

MEM62 said:

Nasqueron said:

MEM62 said:

Borrowing money to buy an asset with a value that falls like a stone is unwise, particularly so when you have the cash available.  Leaving it in the bank might give you more emotional comfort but it gives you the worst financial outcome.  'Borrow' the money from your savings and replace it with a monthly payment equivalent to what your repayments on the loan would have been.  If an unforeseen emergency crops up that costs you more than the £11k you have left to sort you might have to borrow to cover that.  However, being realistic that is unlikely to happen.    

It's a second hand car, the value "dropping" is not something anyone should get stressed over, you buy something, you use it, it's worth less than it was before. Unless you're buying an older car and think you can sell it for a paper profit in 10 years, no-one should care about depreciation. You get your money's worth from using the car

The point is by borrowing to fund the purchase, not only are you taking the hit as you drive your nice shiny car off the dealer's forecourt, you are paying interest on that immediate loss.  Financially, that's nuts.  Depreciation cannot be avoided but paying interest can.  Of course, the older (and lower value) the car, the less of an issue.    

You are not taking a hit or loss unless you want to try and sell the car at the end or part ex because you prefer shiny shiny to MSE ways. You buy a car, you use it, it's worth less, as with anything - that "loss" is you using the car as it was intended for. 

born_again

baser999 said:

Shakin_Steve said:

You may have issues with affordability tests quoting those figures. You are effectively using all of your spare cash each month to pay off a loan, which the lender may think is a tight squeeze.

I didn’t think it would be an issue. As I said, we cover our monthly bills and surplus monies are moved from current to a savings account and NSI by way of standing order. I’d cancel those SOs thereby increasing the monthly surplus to cover the loan. The bank can see what I already have in the linked-savings account and if needs be can be made aware of the other funds, all of which are in instant access savings accounts.

Savings play no part in affordability of loans for good reasons.