Credit Scoring. Advice on sensible borrowing.

[Full Gas]

My daughter is looking to update her car.
She has saved half the money she needs and has been looking to borrow the rest (£5k) on a 24 month personal loan. The High Street APR rates seem very high and I have offered to lend her the money. I have no doubts about her repaying me.
She is debt free. She is aware of building a good credit score for obtaining a mortgage in a few years. To these ends she has credit card she pays off in whole every month.
My question is, would she be better to borrow from me and save at least £30+ a month or pay the extra for a High Street loan as it might give her a better credit score in the future?

[cymatty]

Have you tired looking at higher amounts, usually the cheapest rates are above £7 or 7.5k. Usually you can repay the extra you don't need without charge.

Make use of the banks soft search tools, otherwise if you keep performing searches the rates offered will get worse

[craigjm]

A “credit score” is only one determining factor as to whether you get credit. You don’t need to “build up a good credit score” to get a mortgage you need to avoid bad debt and too much debt but even then we’ll serviced high levels of debt don’t necessarily mean a low credit score. If you are willing to loan her the money then why not save the interest. It’s seems foolish to pay £30 extra a month or whatever to build up something which may or may not help in the future.

[Bumblebee7]

I found that the interest rates were much lower trying to borrow £7k rather than £5k (7.9% vs 3.3% with HSBC). I borrowed £7k and then did an immediate transfer of £2k back into the account so my outstanding loan was only £5k whilst retaining the 3.3% interest rate.

[itlab]

Getting a loan out won’t make it easier for her to get a mortgage.

In fact if she wants one prior to the term ending it could make things harder.

She is doing the right thing already by having a credit card and clearing the debt every month. That will be enough to give her a history.

[Full Gas]

Thanks for the replies. We have taken on board the views made and will follow the avenues mentioned. Thanks.

[Sarnie]

Full Gas said:

Thanks for the replies. We have taken on board the views made and will follow the avenues mentioned. Thanks.

Give her half, let her loan the other half?

Keeps outgoings down, increases her credit history.........and be prepared to need to clear the loan for if she wants to buy a property and the loan hinders her affordability.....