Car finance battle

A Fin24 user is struggling to get vehicle finance over an small unpaid gym membership fee. He writes:

This is my situation. I left the country just over two years ago and left R467 debt unpaid on my gym membership.

I came back two months later and I was already on ITC with a judgment on my name. I immediately paid the outstanding amount but the notice has remained on my ITC.

I have read up on this and after two years the notice must be removed by ITC itself, which will be this Sunday/Monday (last week).

Then I will have a 100% clear ITC record but without any good credit history except my cheque card at FNB.

I have R20 000 saved and will get my hands on another R10 000 by the end of the month to be able to put down a deposit. I want to purchase a 2012 Chevy Aveo 1.6ls for R110 000 and pay the R80 000 over a term of 54 months.

I have already learnt that the best thing would be to open an Edgars or Jet account to build up my credit history over 3 moths and get a 600 point plus credit score, however I am currently stranded without a car and need to buy soon.

I have been a customer at FNB for over 20 years now opening my first BoB account at the age of 6, and have steadily been earning more and am a potential high income earner studying BCompt Accounting and doing financial articles.

Can I convince my bank that my risk profile is good with the deposit and my job/future earnings, or must I rely on third party finance like loans acceptance where I will get vehicle finance but be nailed on interest?

And if I have to go the alternative way, what interest can I expect and would refinancing be an option after 6 months where my credit score is back to normal levels?

Chris de Kock of WesBank responds:

The credit history is only one aspect that WesBank or any other reputable vehicle financing institutions look at when considering a finance application.

No credit history is still better than a poor credit history; therefore it is most important for the customer to follow up to ensure the judgment is removed from the credit bureaux.

It would not be wise for him to open a retail account and to incur unnecessary debt just to build up a credit record.

One of the most important aspects WesBank looks at is the customer's ability to repay the debt (affordability).

A customer's monthly expenditures must be in line with their monthly income and this is where the National Credit Act plays its role in the market by preventing finance institutions from lending money to customers who are already over-indebted.

In this instance, the customer appears to be gainfully employed and can provide proof of his income. If the customer is living within his financial means he should be able to afford a monthly repayment for a car.

Furthermore, the customer is demonstrating commitment to the deal via the substantial deposit and this should greatly assist in the approval of the finance.

It would be to customer's detriment to use a personal loan to finance his car. Although personal loans are easily accessible, they are traditionally priced much higher than car finance, therefore the customer will end up paying much more interest than what he ought to.

It would appear as if the customer is a first-time buyer. WesBank recommends that the customer only buys from a reputable dealership.

All reputable dealerships have finance and insurance Managers. These are individuals who are qualified to provide the best possible finance and insurance related advice to the customer. They will assess the customer's needs and financial situation and will then recommend the best possible finance solution to the customer. They will also facilitate the finance process from start to end.

Based on the facts available (the customer is gainfully employed, can produce proof of income, will have a clear credit record, is not over-indebted and has a substantial deposit) WesBank can almost guarantee that the application will be approved.

The customer can also visit the calculators section on WesBank's website to calculate the monthly repayment of the loan.

  - Fin24

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* Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.

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