Risk another loan?

lindsaygalaxy

I applied for a £25k loan to buy a car as it was cheaper than the finance from the car dealership (loan rate 6.2% Tesco). They text to say it had been accepted but the rate on the letter than has come through is 8.7%. The letter says they will do some final checks once they get back the paperwork. 

Do I risk applying for another loan in hope of a better rate, and at losing the Tesco one? 

CliveOfIndia

This is not an unusual situation.  The advertised "representative" rate is given to at least 51% of successful applicants, but the rate offered to you personally may be adjusted dependent upon your credit history and their internal criteria.

You are at liberty to apply elsewhere of course, but there's no guarantee that you would be offered a better rate.  You may be, but you have no way of knowing until you submit an application.

Remember that any application will leave a hard search on your file.  A couple of searches in quick succession is not the end of the world, but any more than that tends to start raising concerns for lenders.

One option may be to look at a cheaper car.  Whilst no-one can know what a lender's internal criteria are, as a broad rule of thumb there's a reasonable chance that you'll be offered a slightly better rate if you're asking to borrow less - simply down to affordability calculations.  Even that's not a hard and fast rule, there are "bands", for want of a better word, whereby it can be beneficial to borrow ever so slightly more.

But, depending on your income, £25K is a fairly hefty sum, so it may be worth seeing if a lower amount would result in a better APR.

MEM62

lindsaygalaxy said:

Do I risk applying for another loan in hope of a better rate, and at losing the Tesco one? 

A left-field thought I know but how about buying a car that you can afford without lumbering yourself with a chunk of debt?  Run the numbers including depreciation and total interest and see if the idea still looks as good.