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  • FIRST POST
    • duggankieron
    • By duggankieron 6th Jul 18, 9:29 AM
    • 6Posts
    • 0Thanks
    duggankieron
    Loan for a 19 year old
    • #1
    • 6th Jul 18, 9:29 AM
    Loan for a 19 year old 6th Jul 18 at 9:29 AM
    First time poster here, so please bare with me.
    I am about to move into a new job and my monthly income would be around 1200.
    I am looking to treat myself to a new car. The car I am looking at is around 8000, however because of my small credit history and low credit score (even though I have a Gym membership, a phone contract and among other monthly contracts), however when it comes to applying for a loan, the interest just from around 3% to sometimes up to 22%. Is there any way around the stupidly high interest?

    P.S. Please don't suggest that a 19 year old doesn't need a 8000 car, I know I don't, but I want it.
Page 1
    • zx81
    • By zx81 6th Jul 18, 9:39 AM
    • 18,617 Posts
    • 19,870 Thanks
    zx81
    • #2
    • 6th Jul 18, 9:39 AM
    • #2
    • 6th Jul 18, 9:39 AM
    With a low income, limited employment history and a thin credit file, you're going to be paying a lot of interest.

    You're high risk at the moment, so let time do it's thing while you get a credit card and demonstrate some good behaviour and it'll also give you a chance to save as well.
    Last edited by zx81; 06-07-2018 at 9:42 AM.
    • madvicker
    • By madvicker 6th Jul 18, 9:56 AM
    • 144 Posts
    • 99 Thanks
    madvicker
    • #3
    • 6th Jul 18, 9:56 AM
    • #3
    • 6th Jul 18, 9:56 AM
    Trust me, you might want that car now but every month you pay out the loan for it (as % interest will be high with a limited credit history) you will regret it and resent the monthly payments. Especially if the payments are a large proportion of your income.

    Even if you got the best rates (which you won't), you'll be paying 140 a month for a 5 year loan. You're probably looking at 180ish. And don't forget, in 2-3 years time you will likely want a better car.....

    If you need a car, that is different and there are some very good cars you can get for 3000. If you really want a nice car, get a cheap one now - save the rest of the money. Then when you have saved enough, sell the cheap car for a bit of a boost to your finances and buy the car outright.
    Last edited by madvicker; 06-07-2018 at 10:42 AM.
    • LadyDee
    • By LadyDee 6th Jul 18, 10:03 AM
    • 3,130 Posts
    • 3,239 Thanks
    LadyDee
    • #4
    • 6th Jul 18, 10:03 AM
    • #4
    • 6th Jul 18, 10:03 AM
    Good grief! No wonder half the population is in debt. 1,200 is not a lot of income to support much of a lifestyle for a 19 year-old. You'll probably find you can hardly afford to put fuel in it, and it'll only be worth peanuts in a couple of years when you are still paying for it. Insurance? For a 19 year-old?
    • madvicker
    • By madvicker 6th Jul 18, 10:08 AM
    • 144 Posts
    • 99 Thanks
    madvicker
    • #5
    • 6th Jul 18, 10:08 AM
    • #5
    • 6th Jul 18, 10:08 AM
    Good grief! No wonder half the population is in debt. 1,200 is not a lot of income to support much of a lifestyle for a 19 year-old. You'll probably find you can hardly afford to put fuel in it, and it'll only be worth peanuts in a couple of years when you are still paying for it. Insurance? For a 19 year-old?
    Originally posted by LadyDee
    I moved to the UK at 18, got my first car here at 25. Even then, with my wife on my insurance (she's older and been driving for about 10 years by that point) my first year's insurance was 1800. Now after 3 years it's 360. Hate to imagine what the OP's insurance will be with a flash car.... XD

    OP - I forgot about that, you'll be paying an extra 200ish a month just for the insurance with a nicer car. Possibly more...
    Straight away, with maybe 150 for fuel you're spending 530ish a month. Nearly HALF YOUR INCOME.
    • foxy-stoat
    • By foxy-stoat 6th Jul 18, 10:44 AM
    • 2,667 Posts
    • 1,533 Thanks
    foxy-stoat
    • #6
    • 6th Jul 18, 10:44 AM
    • #6
    • 6th Jul 18, 10:44 AM
    Any loan with a rate close to double figures is too much interest.

    Just throwing it out there - you cannot afford a car for 8000, you may want one but you cannot afford it at the moment on your income or credit history.

    Now thats out the way - choose a car you can afford, job done!
    • zx81
    • By zx81 6th Jul 18, 11:06 AM
    • 18,617 Posts
    • 19,870 Thanks
    zx81
    • #7
    • 6th Jul 18, 11:06 AM
    • #7
    • 6th Jul 18, 11:06 AM
    Now thats out the way - choose a car you can afford, job done!
    Originally posted by foxy-stoat
    What sort of crazy talk is that?!
    • MEM62
    • By MEM62 6th Jul 18, 11:12 AM
    • 1,722 Posts
    • 1,327 Thanks
    MEM62
    • #8
    • 6th Jul 18, 11:12 AM
    • #8
    • 6th Jul 18, 11:12 AM
    Please don't suggest that a 19 year old doesn't need a 8000 car, I know I don't, but I want it.
    Originally posted by duggankieron
    Of course you want it. That's understandable at your age.

    However, can I invite you to work out how much that 8K car would cost you over the life of the loan. Let's be generous and assume that you can afford the running costs. You then need to take the amount of interest you are paying on the loan and add it to the amount by which the value of the car will depreciate over the loan term - that is the real cost to you. Work that out and, if you as still happy with what the car will actually cost you and

    1) You are not going to regret all the other things that you are not going to be able to do (holidays, leaving home, adventures with your mates) because you are making payments on the car.
    2) Have a plan for what happens when you loose your job and are trying to make payments on a car that you cannot sell because it is in negative equity.
    3) If the car has a major failure you are happy to have it sitting on your drive with you unable to use it because you cannot afford the repairs.

    then go ahead.
    • foxy-stoat
    • By foxy-stoat 6th Jul 18, 11:26 AM
    • 2,667 Posts
    • 1,533 Thanks
    foxy-stoat
    • #9
    • 6th Jul 18, 11:26 AM
    • #9
    • 6th Jul 18, 11:26 AM
    What sort of crazy talk is that?!
    Originally posted by zx81
    Thinking outside the box
    • jimbo747
    • By jimbo747 6th Jul 18, 11:47 AM
    • 563 Posts
    • 1,533 Thanks
    jimbo747
    I want it all and I want it now. No wonder Brexit is going tits up.
    • Jockeyjames
    • By Jockeyjames 6th Jul 18, 12:10 PM
    • 10 Posts
    • 4 Thanks
    Jockeyjames
    There isn't a way around the high interest rates - it's down to the risk factor you present to the lender. As a 19 year old on 1200/mo with a few commitments already, they are looking at it as "if you REALLY want the money, you're going to have to pay for it."

    However, saying all that.... I done the same at your age for 5000 on an A3. So do what you want, just play it smart
    • spadoosh
    • By spadoosh 6th Jul 18, 12:11 PM
    • 5,534 Posts
    • 7,533 Thanks
    spadoosh
    First time poster here, so please bare with me.
    I am about to move into a new job and my monthly income would be around 1200.
    I am looking to treat myself to a new car. The car I am looking at is around 8000, however because of my small credit history and low credit score (even though I have a Gym membership, a phone contract and among other monthly contracts), however when it comes to applying for a loan, the interest just from around 3% to sometimes up to 22%. Is there any way around the stupidly high interest?

    P.S. Please don't suggest that a 19 year old doesn't need a 8000 car, I know I don't, but I want it.
    Originally posted by duggankieron
    If you want an 8k car with no credit history and not putting any money down you need to be prepared to pay nearer 12k for it. If youre not, youre not getting an 8k car until you save for it or have built up your credit file to get more favourable rates.

    I want a chateau in france. I reckon someone in the world would lend me the money for it, the problem being theyd probably want to take my liver as collateral. Sometimes its worth dismissing what you want for what you need.
    Don't be angry!
    • Sncjw
    • By Sncjw 6th Jul 18, 12:16 PM
    • 1,916 Posts
    • 1,129 Thanks
    Sncjw
    It will loose value soon after you drive it.

    Given your job is just new maybe save up for it. Then when you have the money you can see if you still want it.

    Given it!!!8217;s a new job I wouldn!!!8217;t get a loan I would save as I know I could change how much I save depending on what I have spent in that month. With a loan you can!!!8217;t chop and change how much you have to pay each month. You got to think about the running costs of the car on top of the loan payments. Saving up for the car may result in you paying off the car faster than a loan would.
    • enthusiasticsaver
    • By enthusiasticsaver 6th Jul 18, 12:23 PM
    • 7,066 Posts
    • 15,311 Thanks
    enthusiasticsaver
    Do yourself a lifelong favour and learn how to manage money now before you end up thousands in debt and paying half your monthly wage on loans and credit card payments. You are on a basic starting salary. An 8000 car is almost 7 months salary. Add the interest on top of that and you will be paying for that car for a long time affecting other things you can save up for and do.

    Learning the difference between needs and wants is also useful. Treating yourself when you have been working for a few years and have some savings behind you is fine. Treating yourself to a car you cannot afford when you have not even started work is just crazy. It will depreciate at an alarming rate. Also the cost of the car is just the start. You also have insurance which will be very high as you are young, cost of maintenance and fuel and car tax if there is any.
    Debt free and mortgage free and early retiree. Living the dream

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    • Fireflyaway
    • By Fireflyaway 6th Jul 18, 12:53 PM
    • 1,921 Posts
    • 2,160 Thanks
    Fireflyaway
    Seems you have already decided that an 8000 car is what you are going to get so you will just have to accept whatever payments are offered. You may not have heard of Dave Ramsey but he has a good saying. Adults devise a plan and follow it. Children do what feels good.....
    • Red-Squirrel
    • By Red-Squirrel 6th Jul 18, 12:56 PM
    • 3,268 Posts
    • 8,810 Thanks
    Red-Squirrel
    I want it all and I want it now. No wonder Brexit is going tits up.
    Originally posted by jimbo747
    Congratulations! You've won the shoehorn of the week award!
    • Red-Squirrel
    • By Red-Squirrel 6th Jul 18, 12:58 PM
    • 3,268 Posts
    • 8,810 Thanks
    Red-Squirrel
    OP I presume you live at home and pay no rent. If you saved up you could have that car paid for in cash by this time next year.

    You might find that when its your hard earned cash sitting in the bank that you've worked hard to earn and gone without to build up, you might think twice about whether the car is really worth giving it up for, and I know I sound like a complete old fogey but that's a really important lesson to learn as young as possible!
    • dealer wins
    • By dealer wins 6th Jul 18, 1:09 PM
    • 5,980 Posts
    • 11,533 Thanks
    dealer wins
    I would urge you to save up for your dream car.

    When you see how hard it is to save up 8000, there is no way you would spend it all on a car trust me!!!
    Choose life
    • AstroTurtle
    • By AstroTurtle 6th Jul 18, 1:46 PM
    • 216 Posts
    • 638 Thanks
    AstroTurtle
    High interest on a depreciating asset.

    You'll pay more than the car is worth when you bought it and be left with a car thats worth half of it later.

    Spend 10,000 on an 8,000 car in 2018

    Sell it for 4000 in 2019.

    You lose 6,000.
    • bd10
    • By bd10 6th Jul 18, 3:43 PM
    • 29 Posts
    • 10 Thanks
    bd10
    @duggankieron:

    You have 2 scenarios to choose from:

    (1) Take out a 8k loan say over 5 years to keep the monthly payments small against your salary. You'll between 3.4% with a major high street bank. That's 140 per month. Total interest is 700. Over 5 years a car is likely to depreciate by 60% (if not more, but let's just use 60%), that's 4,800. So, that way'll you be 5,500 worse off by 2023.

    (2) Save up and buy a car which has seen most of its depreciation. I would get a car which has a long standing history of keep running. That one you pay in cash (or debit card) and the remaining monthly installments which you do not have to pay vis-a-vis option (1), you have saved money and end up ahead!

    If you want that car now which is beyond your financial means, what else do you want in 5 or 10 years? Do yourself a favour and don't sign up to a lifetime of living on credit. Buy hey, feel free to leverage yourself up in debt and learn the hard way. Either way, that'll be your problem.
    Buy assets and accumulate. But to get there, spend your money wisely. If you can buy a 8k car in cash, go for it.
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