Re-apply for a loan

MajicMOLE · 5 December 2019 at 10:51AM

Hi - just after a bit of quick advice

I am after a loan to put towards a purchase of a new car (loan is cheaper than the PCP finance at 4.9% the dealer is offering me). I applied for a loan around 6 weeks ago through Cahoot, which was rejected.

I decided to wait a while before re-applying, kept an eye on my credit score (which currently sits at 990 on experian) and today applied for a 10k Loan through sainsburys - which was immediately accepted and they are sending the documents out. Great - problem is they are offering me 4.3% rather than the headline figure of 2.9% - which is still cheaper than PCP but not at the rate I was hoping for

Question is, am I ok to apply elsewhere now I have been accepted at Sainsburys? Was going to apply at tesco or yorkshire, who have similar 2.9%-3.0% rates, and my eligibility is 90% for both of these, however I don't want it to effect my sainsburys loan as obviously each application will flag up on my credit report. Suppose the question is, can sainsburys change their mind after iv had a successful application and loan offer

Thankyou

[Deleted User] · 5 December 2019 at 10:54AM

You can apply elsewhere, but multiple applications could start to lower your chances.

You're assessed on risk, not on your credit score, so it may be that you won't do better than you gave. 4.3% isn't a bad rate

DrEskimo · 5 December 2019 at 11:03AM

Remember to look at the actual amount of interest charged, not the rate. A PCP loan is structured differently to a standard personal loan (deferred final payment) so incurs higher interest even at the same APR.

Roughly, the interest charged on a PCP is equivalent to a personal loan with an APR 50% higher than that of the PCP APR (i.e. a PCP with a 4.9% APR would incur similar interest charges as a personal loan with a 7.5% APR). This is very rough though, as it depends on the GFV, and that varies car to car. The closer the GFV is to zero, the less difference there is.

MajicMOLE · 5 December 2019 at 11:53AM

Deleted_User wrote: »

You can apply elsewhere, but multiple applications could start to lower your chances.

You're assessed on risk, not on your credit score, so it may be that you won't do better than you gave. 4.3% isn't a bad rate

Thankyou - when you say multiple applications could lower my chances - is that chances to get approved on a new loan, or lower my chances on the sainsburys one? I appreciate 4.9% isnt bad, but if I can get 3% then obviously that is better! But if it will effect the Sainsburys loan then its probably not worth the risk?

[Deleted User] · 5 December 2019 at 12:33PM

It shouldn't impact your existing offer, just subsequent ones.

Ben8282 · 5 December 2019 at 5:48PM

You have been very sensible to go for a loan to buy your car outright rather than PCP.
To be honest I think that you should just accept the loan that you have been offered. The APR is not outrageous. While of course a different lender might give you a better rate that is by no means certain. You already have 2 hard searches for loan applications on your credit files and so far have had one outright decline and one acceptance. You mention 90% chance eligibility from other lenders. That means 90% chance of getting the loan NOT 90% chance of a lower APR.

MajicMOLE · 5 December 2019 at 6:04PM

Ben8282 wrote: »

You have been very sensible to go for a loan to buy your car outright rather than PCP.
To be honest I think that you should just accept the loan that you have been offered. The APR is not outrageous. While of course a different lender might give you a better rate that is by no means certain. You already have 2 hard searches for loan applications on your credit files and so far have had one outright decline and one acceptance. You mention 90% chance eligibility from other lenders. That means 90% chance of getting the loan NOT 90% chance of a lower APR.

Thankyou! I did deliberate for a while and only want the car for 4 years, but seems more “money saving” to sell it after 4 years privately rather than to PCP. I appreciate only 51% of people get the headline quote, and that 4.3% is still good - however I do feel I should be in that 51% 😬 and did want the best rate. The cahoot application was a stab in the dark 6 weeks ago, as it was only a 60% chance, but had the best rate. My score dropped from 999 to 920 following that, but has since gone back up to 990. I know this doesn’t take into account an affordability check. But I don’t intent / need any more “credit” for the foreseeable, so don’t mind doing a bit of temporary “damage” to my score if it means me getting a better rate. Or is that the wrong way to look at it? Thanks for everybody’s advice btw!

Ben8282 · 5 December 2019 at 6:18PM

A single hard search on your credit files should NOT have resulted in any drop whatsoever in your 999 credit score.
As I\m sure you now realise the credit score is meaningless and does not in any way indicate that you will be accepted for any specific financial product or get any specific rate of interest.
The credit score drop after this single application indicates to me that there have been other recent hard searches prior to this. Whatever new credit products were applied for at that time and any balances on these accounts could also be affecting the rate of interest you are being offered. If by any chance you already have a loan the chance of being offered the headline rate on a second loan is very low indeed, 999 credit score or no 999 credit score.

Willing2Learn · 5 December 2019 at 6:20PM

Hi MajicMOLE,

Do you realise that lenders do not use or see your 'credit score'? A lender scores you against their independent policies and procedures using the data held in your credit files, added to the data you submit in your application, added to data they may already hold on you as an existing or returning customer.

Re-apply for a loan

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