taking out a loan/credit card Watch

Joewoolfx
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Hello,I have just turned 18 and i am hoping to either get car finance or a loan with my bank for £7500 by december. I currently earn £750-850 a month however i start a new job in october where my annual salary is £16250 and so £1200 after tax. I am good at saving and over the years have bought motorbikes for £1000, £2500 and a car for £4000 all of which my bank will be able to see. Is my best option to open a credit card to try and quickly build my credit in time for december/January? or just carry on paying my phone contract and car tax DD and continue saying money in my bank and hope ill get accepted for a loan? I only ask this as i don't want to go and open a credit card only for it to ruin my chances of getting a loan 3 months later.I am not bothered about the APR rate of the credit card because i guarantee to pay it off in full every month.Any help appreciated.
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FXX
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If you can pay the full amount off every month then there's no reason not to get a credit card. It'll only count against you if you fail to pay it. Otherwise it's a good way to build a good credit rating, and credit cards are good buying in dodgy places (if your card gets cloned it's the credit card company's money, not yours) or for insurance on anything over £100.
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Joewoolfx
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But if I apply for 2 forms of credit in say 3 months won't that work counter productively?Thanks for the reply!
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Reality Check
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(Original post by Joewoolfx)
Hello,I have just turned 18 and i am hoping to either get car finance or a loan with my bank for £7500 by december. I currently earn £750-850 a month however i start a new job in october where my annual salary is £16250 and so £1200 after tax. I am good at saving and over the years have bought motorbikes for £1000, £2500 and a car for £4000 all of which my bank will be able to see. Is my best option to open a credit card to try and quickly build my credit in time for december/January? or just carry on paying my phone contract and car tax DD and continue saying money in my bank and hope ill get accepted for a loan? I only ask this as i don't want to go and open a credit card only for it to ruin my chances of getting a loan 3 months later.I am not bothered about the APR rate of the credit card because i guarantee to pay it off in full every month.Any help appreciated.
It's unlikely that you will be approved for a loan for £7500. Even in this new job, it's a low income. Do you still live at home? What are your monthly expenses such as rent, council tax etc (if you live at home, these aren't going to be relevant).

Opening a credit card account a couple of months before trying to get an unsecured personal loan is probably the worst thing you could do. Not only will the credit search lower your overall credit score, but the newly-minted credit card account, with available credit sitting there and a very limited payment history will result in the bank being extremely unwilling to advance you further unsecured lending, until they've seen you can manage the credit card properly. After all, you've already said that the only credit history you have is a phone contract (which is better than nothing) - I presume there's no other credit history for them to go on.

You might have a little bit more luck with car finance (as there's an asset to secure the loan against), but you would probably need to put a reasonably large deposit down, and pay a higher APR than you'd like. The problem with approving the car finance (and really the unsecured lending too) will be the very limited time you will have had in the job - lenders like to see 6 months stable job history as a minimum.
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IWMTom
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(Original post by Joewoolfx)
Hello,I have just turned 18 and i am hoping to either get car finance or a loan with my bank for £7500 by december. I currently earn £750-850 a month however i start a new job in october where my annual salary is £16250 and so £1200 after tax. I am good at saving and over the years have bought motorbikes for £1000, £2500 and a car for £4000 all of which my bank will be able to see. Is my best option to open a credit card to try and quickly build my credit in time for december/January? or just carry on paying my phone contract and car tax DD and continue saying money in my bank and hope ill get accepted for a loan? I only ask this as i don't want to go and open a credit card only for it to ruin my chances of getting a loan 3 months later.I am not bothered about the APR rate of the credit card because i guarantee to pay it off in full every month.Any help appreciated.
You won't get a bank loan, that's for certain; you've got no credit history and a low income. As Reality Check has said, you may have some better luck with a car financing provider, but be prepared to pay extortionate interest rates, probably about 15% APR.

I'll be honest with you, there is very little you can do within a few months to make this happen - it'd take a solid few years before your history of payment was even borderline acceptable, and your salary is still rather low. Banks typically favour homeowners, which I can only presume you are not.
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Joewoolfx
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(Original post by IWMTom)
You won't get a bank loan, that's for certain; you've got no credit history and a low income. As Reality Check has said, you may have some better luck with a car financing provider, but be prepared to pay extortionate interest rates, probably about 15% APR.

I'll be honest with you, there is very little you can do within a few months to make this happen - it'd take a solid few years before your history of payment was even borderline acceptable, and your salary is still rather low. Banks typically favour homeowners, which I can only presume you are not.
Forgot to mention I was also looking at secured loans with Halifax "against the car" so basically car financing with a lower rate as 15% is crazy especially when the amount I'm borrowing can be paid in 6 months of wages laugh out load,
Any tips with secured loans? The actual value of the car is around 13000, and I'm putting a 5 or 6 thousand pound deposit
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IWMTom
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(Original post by Joewoolfx)
Forgot to mention I was also looking at secured loans with Halifax "against the car" so basically car financing with a lower rate as 15% is crazy especially when the amount I'm borrowing can be paid in 6 months of wages laugh out load,
Any tips with secured loans? The actual value of the car is around 13000, and I'm putting a 5 or 6 thousand pound deposit
It's still very unlikely you'll get the loan with a mainstream provider like a high-street bank; in their eyes, you are not credit worthy.
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artful_lounger
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Credit rating: easy to destroy, hard to build up.

Making applications for credit does lower your credit score, and making several in a short period (i.e. less than a year) will definitely hurt it. I would recommend getting a credit card and using it for your regular monthly expenses (e.g. grocery shopping, paying bills etc) and making sure you don't go over your limit and you pay the minimum payment on time every month (or the entire balance). This will be a good start to establishing a credit rating.

Then just save up over the next year or so in your new job, while keeping up responsible credit use, and buy the car outright. In general getting credit to make a single "purchase" or what have you is a bad idea - unless that "credit" is a mortgage and the purchase is a house. It's realistically irresponsible, especially as you already have two motorbikes and a car based on your original post.
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Joewoolfx
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(Original post by artful_lounger)
Credit rating: easy to destroy, hard to build up.

Making applications for credit does lower your credit score, and making several in a short period (i.e. less than a year) will definitely hurt it. I would recommend getting a credit card and using it for your regular monthly expenses (e.g. grocery shopping, paying bills etc) and making sure you don't go over your limit and you pay the minimum payment on time every month (or the entire balance). This will be a good start to establishing a credit rating.

Then just save up over the next year or so in your new job, while keeping up responsible credit use, and buy the car outright. In general getting credit to make a single "purchase" or what have you is a bad idea - unless that "credit" is a mortgage and the purchase is a house. It's realistically irresponsible, especially as you already have two motorbikes and a car based on your original post.
I have sold the motorbikes.
Waiting a year feels like so long to me as I see £220 a month a completely achieveable figure to spend on a car+insurance. I love at home and only pay £100 a month rent + 30 pounds a month in car tax and my phone contract and so every month I have a good £800/900 disposable.

Maybe I've seen car finance for 9.4% for someone with average credit, would I still not quality for that?
My current job I've been with the company for 2 years
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RogerOxon
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(Original post by Joewoolfx)
Waiting a year feels like so long to me as I see £220 a month a completely achieveable figure to spend on a car+insurance.
Have you had any insurance quotes?

Whenever you think about 'credit', try replacing the word with 'debt' and see if it still sounds like a good idea. I'd also calculate the interest that you'd pay over the lifetime of the loan. You also need to budget for unforeseen repairs, servicing and petrol.

I'd wait and save. Hopefully the new job will be everything you want, but would you want to be stuck in it because of debt? The company may also have issues - it's best to have a buffer of savings.
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IWMTom
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(Original post by Joewoolfx)
Maybe I've seen car finance for 9.4% for someone with average credit, would I still not quality for that?
My current job I've been with the company for 2 years
You don't have average credit, you have poor credit at best - you're 18, what history could you possibly have.
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artful_lounger
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(Original post by Joewoolfx)
I have sold the motorbikes.
Waiting a year feels like so long to me as I see £220 a month a completely achieveable figure to spend on a car+insurance. I love at home and only pay £100 a month rent + 30 pounds a month in car tax and my phone contract and so every month I have a good £800/900 disposable.

Maybe I've seen car finance for 9.4% for someone with average credit, would I still not quality for that?
My current job I've been with the company for 2 years
(Original post by IWMTom)
You don't have average credit, you have poor credit at best - you're 18, what history could you possibly have.
Yep, unfortunately "no credit history/rating" is actually worse than "average/slightly below average" because they have NO idea whether you'll default on payments etc or not in the former circumstance - whereas in the latter case they're reasonably certain you won't do so, at least regularly.
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Joewoolfx
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(Original post by IWMTom)
You don't have average credit, you have poor credit at best - you're 18, what history could you possibly have.
A year of paying motorbike insurance, 2 years worth of direct debit for a contract, 2 years worth of direct debit tax for a motorbike and my vehicle now.

That way surely this willl help my bank see me as 'average' as they can see years worth of positive cash flow and 2 years worth of direct debits that have never bounced?
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Joewoolfx
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(Original post by RogerOxon)
Have you had any insurance quotes?

Whenever you think about 'credit', try replacing the word with 'debt' and see if it still sounds like a good idea. I'd also calculate the interest that you'd pay over the lifetime of the loan. You also need to budget for unforeseen repairs, servicing and petrol.

I'd wait and save. Hopefully the new job will be everything you want, but would you want to be stuck in it because of debt? The company may also have issues - it's best to have a buffer of savings.

The money I'm looking to borrow including my savings will cover the price of the insurance. I appreciate what you mean in regards to the new job! Thank you
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Joewoolfx
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(Original post by IWMTom)
It's still very unlikely you'll get the loan with a mainstream provider like a high-street bank; in their eyes, you are not credit worthy.
Even if its the bank I've been with for 8 or so years?

Thanks for your help
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IWMTom
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(Original post by Joewoolfx)
A year of paying motorbike insurance, 2 years worth of direct debit for a contract, 2 years worth of direct debit tax for a motorbike and my vehicle now.

That way surely this willl help my bank see me as 'average' as they can see years worth of positive cash flow and 2 years worth of direct debits that have never bounced?
But you don't have two years of a contract because you've just turned 18; you can't enter into a contract before you're 18.

Your CREDIT HISTORY is going to be borderline non-existent; your motorbike insurance and direct debits don't make part of it - only your credit accounts.

Your own personal bank will obviously view you more favourably since you have money going through the account, but this isn't 1974 - you need a CREDIT history to obtain CREDIT.

(Original post by Joewoolfx)
Even if its the bank I've been with for 8 or so years?

Thanks for your help
Yes, even then.
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Joewoolfx
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[QUOTE=IWMTom;73164590]But you don't have two years of a contract because you've just turned 18; you can't enter into a contract before you're 18.

Your CREDIT HISTORY is going to be borderline non-existent; your motorbike insurance and direct debits don't make part of it - only your credit accounts.

Your own personal bank will obviously view you more favourably since you have money going through the account, but this isn't 1974 - you need a CREDIT history to obtain CREDIT.

Thats why i said two years worth of DIRECT DEBIT as the contract is clearly not in my name, however it is directly debited from my account.
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Reality Check
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(Original post by RogerOxon)
Whenever you think about 'credit', try replacing the word with 'debt' and see if it still sounds like a good idea.
This is a really good mantra - more people should use it.

Joewoolfx - you don't really want other people's opinions and help with this, do you? You've had several people tell you now that it's unlikely you'd be successful with mainstream bank finance (but might have limited success with car financing) but you just don't want to hear that.
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IWMTom
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[QUOTE=Joewoolfx;73164700]
(Original post by IWMTom)
But you don't have two years of a contract because you've just turned 18; you can't enter into a contract before you're 18.

Your CREDIT HISTORY is going to be borderline non-existent; your motorbike insurance and direct debits don't make part of it - only your credit accounts.

Your own personal bank will obviously view you more favourably since you have money going through the account, but this isn't 1974 - you need a CREDIT history to obtain CREDIT.

Thats why i said two years worth of DIRECT DEBIT as the contract is clearly not in my name, however it is directly debited from my account.
But this means nothing to a lender? All they would see if you showed them your bank statements is money moving - it's not a credit agreement you are responsible for, so they simply will not care.

I don't think you fully understand how difficult it is to get credit these days. Like I said, this isn't 1974.
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jungle_ninja
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(Original post by artful_lounger)
Credit rating: easy to destroy, hard to build up
This; so many times this.
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