Car finance/personal loan but not a home owner.
Discussion
Ian looking into purchasing a new car. I will more than likely be looking to take out fiancé or a personal loan. I am unsure if not being a homeowner is going to effect me though? I will be buying a house sometime later in the year and have a deposit etc set aside for that. So in the meantime I'm not a homeowner. Will this have a detrimental effect on me being approved loan/finance amount will be circa £15000? I don't want to apply and bet coked back as I am cautious for future mortgage application. My experience credit score is 999 excellent but I don't know if this makes any difference.
I had a car loan for that amount before I bought my house, it wasn't a problem. The repayments are the key and as long as you have a good credit score you should be fine.
The only thing I would say is that I think it's suggested you wait 6 months between applying for loans as it may have a detrimental effect on your credit score applying for too many loans in a short period of time.
Also, when working out your mortgage make sure you aren't over extending by having the car loan and the mortgage. Depending on whether you're renting at present you'll find that buying the house is only the start of the costs! Furniture is a big cost and the fees are a pain as well.
The only thing I would say is that I think it's suggested you wait 6 months between applying for loans as it may have a detrimental effect on your credit score applying for too many loans in a short period of time.
Also, when working out your mortgage make sure you aren't over extending by having the car loan and the mortgage. Depending on whether you're renting at present you'll find that buying the house is only the start of the costs! Furniture is a big cost and the fees are a pain as well.
If there is one urban myth I would like to debunk it's the idea of a universal credit score.
Most, if not all lenders will assign you a 'score' - It really boils down to Yes, No, 'maybe' (aka get a human to look at it), based on raw information given to them by the credit agencies. The business of building and updating these hugely complex underwriting systems is a real art and lenders put a huge amount of work into it, so they're very guarded about what criteria they use and what onus they put on each bit of data.
Some will see homeownership as a good thing - after-all people who are mortgage payers are automatically more responsible than renters are they not....?
Some might see it as a bad thing, after-all people who rent, or ideally who still live with their folks have more disposable income and more of an income buffer if things go wrong don't they....?
In truth it will probably have some sort of effect to their automated decision, but not an be-all-and-end-all one - the basics are still the most important - income v fixed expenditure and past history of repayment.
Most, if not all lenders will assign you a 'score' - It really boils down to Yes, No, 'maybe' (aka get a human to look at it), based on raw information given to them by the credit agencies. The business of building and updating these hugely complex underwriting systems is a real art and lenders put a huge amount of work into it, so they're very guarded about what criteria they use and what onus they put on each bit of data.
Some will see homeownership as a good thing - after-all people who are mortgage payers are automatically more responsible than renters are they not....?
Some might see it as a bad thing, after-all people who rent, or ideally who still live with their folks have more disposable income and more of an income buffer if things go wrong don't they....?
In truth it will probably have some sort of effect to their automated decision, but not an be-all-and-end-all one - the basics are still the most important - income v fixed expenditure and past history of repayment.
Assuming your credit rating is good i.e. good payment history on cards / loans and you can demonstrate that you can afford the monthly payments on the car then it should matter that much whether you own or rent your current property. Being a homeowner does generally improve the finance companies 'score card' but it's certainly not a requirement. About 50% of the business we write is for tenants and that's with mainstream finance companies, we don't deal in sub-prime at all.
However; your future mortgage application will take into account your expenditure at the time so you'll need to factor this in.
(if you'd like any finance quotes then feel free to send me a message.)
Cheers, Richard
However; your future mortgage application will take into account your expenditure at the time so you'll need to factor this in.
(if you'd like any finance quotes then feel free to send me a message.)
Cheers, Richard
Thanks for the advice folks. I have done the maths and aaffordability is not a problem. Even with the eventual mortgage repayments factored in. I won't be looking to buy a property till later in the year, possibly even next year. I have my deposit and furniture etc fund set to the side so that is all taken care of. My credit score, by experian is 999 excellent. I have had a few loans in the past and paid them off early. My main concern was applying for a loan/finance and being rejected. I didn't want to negatively impact my credit score and make it more difficult to secure a mortgage at a later date.
Life is too short to always be sensible and save every last penny, so I'd like to enjoy a bit of my disposable income before it dries up when kids etc come along.
Life is too short to always be sensible and save every last penny, so I'd like to enjoy a bit of my disposable income before it dries up when kids etc come along.
Fat hippo beat me to it. Mortgage companys will see all your expenditures, a car loan WILL effect how much they lend you. Specially with the latest crack downs, they check all aspects now due to the credit crunch. Lending too much to customers was one of the problems.
If it were me, I buy the house first then 12 month later the car. Sorry to soung boring but the house takes priority all the time.
If it were me, I buy the house first then 12 month later the car. Sorry to soung boring but the house takes priority all the time.
Easty-5 said:
Thanks for the advice folks. I have done the maths and aaffordability is not a problem. Even with the eventual mortgage repayments factored in. I won't be looking to buy a property till later in the year, possibly even next year. I have my deposit and furniture etc fund set to the side so that is all taken care of. My credit score, by experian is 999 excellent. I have had a few loans in the past and paid them off early. My main concern was applying for a loan/finance and being rejected. I didn't want to negatively impact my credit score and make it more difficult to secure a mortgage at a later date.
Life is too short to always be sensible and save every last penny, so I'd like to enjoy a bit of my disposable income before it dries up when kids etc come along.
Your credit file won't show if an application was successful or not, just what applications you made in terms of amount of credit requested and term. In the past a credit file showing a lot of applications in a short period used to be seen as a negative, but not so these days, the reason is two fold, people are much more rate savvy these days and will shop around for the best rate on most things which can lead to a lot of 'hits' plus everyman and his dog now requests some sort of background check.Life is too short to always be sensible and save every last penny, so I'd like to enjoy a bit of my disposable income before it dries up when kids etc come along.
Personally I don't think your 'non homeowner' status will hurt you buying a car on finance, and getting a refused a deal won't hurt you at all, but as many people have said 'affordability' is a very hot category at the moment and an outstanding couple of grand of credit will effect how much you are likely to be offered for a mortgage.
I worked in finance for a decade, including time as an underwriter, but left the industry 3 years ago, so I'm not 100% up to date.
throt said:
Fat hippo beat me to it. Mortgage companys will see all your expenditures, a car loan WILL effect how much they lend you. Specially with the latest crack downs, they check all aspects now due to the credit crunch. Lending too much to customers was one of the problems.
If it were me, I buy the house first then 12 month later the car. Sorry to soung boring but the house takes priority all the time.
Agree entirely. Why screw up buying the house you want?If it were me, I buy the house first then 12 month later the car. Sorry to soung boring but the house takes priority all the time.
Up to £15k is then just a simple unsecured personal loan.
Thanks for all the advice folks. Affordability is not an issue. With the loan repayments plus mortgage repayments, I will still be able to live comfortably. With regards to how much of a mortgage I can borrow, I am not looking to borrow anywhere near the maximum I should be able to borrow, so again that isn't an issue. I will be looking to borrow circa 75-100k less than the maximum I can borrow.
The jist of what is posted up above, seems to me, that it is not whether you can afford both the loan and the mortgage - or even that you intend to borrow less than you could, more that if you take the loan then the mortgage company may consider this negatively because it is an additional drain on your finances that *might* hurt their chances of repayment. The mortgage market is so fickle right now they hardly need an excuse to turn you down. So, if the loan for the car is just a frivolous extra right now, maybe consider waiting until you've secured the mortgage and then go nuts. Or do it anyway and see what happens! 
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