Jump to content

Confused at this outcome!
CC V Personal Loan


  • Please log in to reply
16 replies to this topic

#1 tweedy08

Posted 07 December 2012 - 09:56 AM

So my daughter has just finished school and has been working part time for the last 4 years. She needed some repairs done on her car and was contemplating getting a loan and buying a new car.

Anyhow, after a lot of contemplation I agreed with her that she should get her current car repaired since the repairs are around $2k to get fixed (probably less if she shops around). I just didnt want her having the large repayment responsibility of a car loan just yet and we are not in a financial position to lend her the money unfortunately.

So we went into her bank and they suggested definitely a personal loan. The minimum amount on that was $4k, That was fine since she could just pay $2k straight back onto the loan and get her repairs done. So we do the application and it comes back declined due to her income. She gets at least $350 in the hand a week and has no expenses. The lady says that she cant understand why it was declined since the repayments would be $109 per month. So she said to apply for a credit card and then get the repairs done and cut up the card. I hesitantly agreed and that was only because I thought that well she wasnt approved for the loan so this wont go through either.

Well imagine my horror when the application came back accepted.....for $4200!!!

Why would the bank decline for the loan but approve the credit card. How do banks work? I have told DD that I will hold her card and that she can get her car fixed then we are cutting it up! We are going to work the repairs into the affordable payments so that she will have it paid in the 55 days interest free time.

Any other suggestions I can offer her. She is 18 and I dont want her falling into the trap of bad debt so young! I am still trying to talk her out of even accepting the card and just going into a joint loan with her dad. I know CC arent all that evil, but as a parent I just want her to be responsible.

Thank you for advice in advance.

#2 julzely

Posted 07 December 2012 - 10:33 AM

I can’t help on how banks make decisions and given your predicament the credit card doesn't sound like a bad idea.  However I would make a spreadsheet showing how much in interest she will have to pay depending on how long it takes her to pay back the $2000.  I think this will give her a good idea of the “real” cost of borrowing money.  Also please be aware that is it UP TO 55 days interest free, so you would need to know your billing cycle before relying on this. You should also be able to contact the bank and request a lower limit on the credit card. Unless she has already proved to be very irresponsible with money I wouldn't necessarily just cut up the card or have you hold onto it as I think at 18 it is her choice if she wants to use it. However I would arm her with all the information, to help her make an informed choice.

Another idea is to put the repairs on the credit card, then apply for a credit transfer to a different card which often gives you anywhere from 3 months to 12 months interest free.  Then cancel the old card.  I haven’t actually done this so you should probably do some research around whether or not it is a valid option in your situation.


#3 tweedy08

Posted 07 December 2012 - 10:51 AM

She is very responsible with money or as responsible as an 18 year old can be of course.....lol.

I have spoken with her and we both agree that perhaps the amount is a little too high for her atm (temptation wise) and when she goes in to the bank to collect the card she is going to ask them to lower the limit.

Both hubby and I have armed her with all the information we possibly can including the troubles we had when we were young and given money. We have ensured she knows that this is NOT free money and that she does need to pay it back. She is happy for the card to be left at home in order to avoid those big ticket impulse buys that we often regret when we get home....lol.

I am still shocked at this outcome though. I really thought a personal loan would be the more affordable option over the CC but who knows. Maybe I am thinking about this all wrong?

#4 M1B2G

Posted 07 December 2012 - 11:20 AM

The loan is more sensible for you guys...  However the credit card has a greater capacity to earn profits for the bank...  

Banks do not make money off people who pay their credit card debt quickly they make it off people who are stuck in a cycle of paying off a payment against their credit card debt..

My pensioner parents continue to get offered completely inappropriate credit card limits that they cannot afford on their small fixed income.

#5 Beanbag Warrior

Posted 07 December 2012 - 11:28 AM

A credit card has a MUCH smaller minimum repayment on it than a loan does.  My $6k visa only needs about $35 put on it to retain the card.  Then, they can earn the interest they'll be charging you, so of course they'll give her the credit card over the loan.

By cash in hand, do you literalyl mean notes to palm, or just what goes into her bank.  If you literally mean CIH, then I'm not surprised - it's hard to prove savings without a DD from payroll into her account.

#6 tweedy08

Posted 07 December 2012 - 11:31 AM

QUOTE (NapCat @ 07/12/2012, 12:28 PM) <{POST_SNAPBACK}>
By cash in hand, do you literalyl mean notes to palm, or just what goes into her bank.  If you literally mean CIH, then I'm not surprised - it's hard to prove savings without a DD from payroll into her account.


I mean after tax and what is put into her bank account original.gif


#7 Mrs Mc

Posted 07 December 2012 - 02:20 PM

Does she have any accounts in her name, like a phone account.  I know when i was younger, i got declined for a mobile phone.  They told me go get a credit card, but small items on it and repay it straight away, that will give her a credit rating.  At the moment she would not have a credit rating at all.


#8 ellebelle

Posted 07 December 2012 - 02:31 PM

I would be asking to speak to someone more senior in the bank. I think that's appalling.

#9 tweedy08

Posted 07 December 2012 - 02:47 PM

QUOTE (Mrs Mc @ 07/12/2012, 03:20 PM) <{POST_SNAPBACK}>
Does she have any accounts in her name, like a phone account.  I know when i was younger, i got declined for a mobile phone.  They told me go get a credit card, but small items on it and repay it straight away, that will give her a credit rating.  At the moment she would not have a credit rating at all.


Nothing. Her Mobile phone is prepaid and all utility bills are in mine and her dads name. She actually giggled and said that she doesnt even have a mobile phone plan yet she has her own CC!

QUOTE (ellebelle @ 07/12/2012, 03:31 PM) <{POST_SNAPBACK}>
I would be asking to speak to someone more senior in the bank. I think that's appalling.


I am thinking of doing that when she goes in to pick up her card. I do think though it has to do with the fact the the repayments on a credit card are a lot less harsh than a personal loan just as NapCat has said.

Maybe im being an overprotective parent and should let her have this responsibility. We are definitely getting the amount lowered though when she gets the card. At least she is less likely to get in trouble with a $2k card over a $4k card.

I am still shocked though about this whole scenario. Well on the bright side, she will have her car fixed  up and I wont have to worry about her being out and her car not starting.

Its crazy how banks work these days as I was chatting with DD BF just this morning and he has just been approved for a $20k car loan but couldnt get any more than $1k for a CC yet he has been working FT for 2 years on well over $900pw.

Very weird!! But I will ensure my daughter is armed with all the right info in order to avoid trouble. Between us though, I would jump in and make the monthly repayment if she got in trouble. Would hate for her to stuff up her credit rating so young. I wont be telling her that though and she already said that she applied for an extra card for me and will be leaving her card with her dad once the repairs are done. The card is linked to her bank account so she can easily transfer money directly over to the card in order to make repayments.


#10 opethmum

Posted 07 December 2012 - 03:04 PM

I don't think cutting up the card would be a good idea in the long run, I think it would be a good thing for her to have in case this happens again and that she can get those big ticket items when she feels she is able to bare the cost.
When she does apply for a home loan or personal loan I think her paying off the credit card says to the bank that she can repay loans on time. Make sure she keeps on top of the repayments, set up internet banking direct debits from her account to her cc so she does not forget to repay the loan and each month sit with her to review her statements and budget accordingly for the next month etc.
Also if she is so tempted perhaps put the cc in a cup of water and freeze it.
Good luck!


#11 anasam

Posted 07 December 2012 - 04:46 PM

Have you tried a different bank? Not all banks use the same criteria for deciding on loans.

#12 FeralLIfeHacker

Posted 07 December 2012 - 04:53 PM

QUOTE (Mumof1B2G @ 07/12/2012, 12:20 PM) <{POST_SNAPBACK}>
The loan is more sensible for you guys...  However the credit card has a greater capacity to earn profits for the bank...  

Banks do not make money off people who pay their credit card debt quickly they make it off people who are stuck in a cycle of paying off a payment against their credit card debt..

My pensioner parents continue to get offered completely inappropriate credit card limits that they cannot afford on their small fixed income.



This.

We applied and were approved for a balance transfer on a cc, the amount was $2000,  the new CC came with $5k credit limit, I mentioned this to a friend in banking and she said it was common practice since the bank hopes you spend the extra $3k.

#13 *JAC*

Posted 07 December 2012 - 06:44 PM

Just to comment on PP's saying you need a credit card or similar to 'get' a credit rating. This is not true. All that appears in a credit check are defaults and things you've applied for. in facet if you list a credit card when applying for something, it is more of a liability than a positive. Even if you have zero balance they look at the limit as a debt.

#14 jojo24

Posted 09 December 2012 - 08:37 PM

tell her to shop around we recently needed $2k worth of stuff done to the car and they offered 2 payment options 1 was interest free pay off over 12months, the other was pay some up front and pay off over 6 months.

#15 KT1978

Posted 09 December 2012 - 08:44 PM

Does she have a savings plan? Maybe a good time to start her off saving at least $100 week after te repairs are paid off? That way the next big expense will be taken care of.

#16 Let_it_Rain

Posted 09 December 2012 - 08:54 PM

I'd say it came down to affordability. The bank has to assume some expenses even if she does not have them which whill effect it if she has a lowish income.

A personal loan will have fixed repayments since there is an end date, credit card she can pay $50 a month forever so much more affordable.

I worked for a bank until recently and for us a personal loan was a "better" sale than a credit card.

Lying about the outcome of an application would also be a sackable offense so I somewhat doubt they would be saying she was declined to get a different sale.

#17 ~ppp~

Posted 09 December 2012 - 08:56 PM

If your daughter takes the credit card and responsibly pays it back I would think this would help to establish a good credit rating for life for her which will come in handy in the future for home loans etc.

But I know personally I saved heaps of money and always had about $8k saved from 18-22years of age ( working 12 hours a week), then got a credit card and was then always in debt as i just bought what i wanted rather than saving for something I wanted.

My one friend who is excellent with money and paid her mortgage off in <5 years has never allowed herself a credit card. So I do think credit card require a heap of discipline and cutting the card up might be the best approach :-)

Eta: just read above and sounds like it doesn't help the credit rating. Personally is try and keep her away from credit cards then

Edited by knowsnotmuch, 09 December 2012 - 11:55 PM.





1 user(s) are reading this topic

0 members, 1 guests, 0 anonymous users

 

Natural pain relief in the early stages of labour

While managing labour pains on your own can be daunting, there are a number of natural pain relief options to help you cope until you are admitted to hospital.

Chinese woman gives birth to quintuplets

After six years of trying for a baby, a couple’s dreams have come true many times over after the mum gave birth to quintuplets this week.

Five-year-old shoots nine-month-old brother dead

A nine-month-old baby boy died on Monday after he was shot in the head by his five-year-old brother in their grandfather's home.

'Is that baby yours?'

She is my daughter. I gave birth to her. I nurse her. But she doesn't have any of my genes.

Episiotomy in childbirth: not just 'a little snip'

Episiotomies have a place in maternity care – and can occasionally save lives – but should not be performed routinely.

Toddler aggression not caused by language delays after all: study

The logic was that children who don’t have the language to fully express themselves will lash out when they’re misunderstood. Not anymore.

Why we chose to adopt a child with Down sydrome

Everyone in foster care (and really in life) has something that makes them more vulnerable. We just know what our son's is.

Object of desire

Curvy mums make clever babies

Scientists appear to have discovered why women have evolved to have more curves than men – shapely thighs and bottoms lead to healthier babies.

'We'll make sure they know how much she loved them'

A first-time mum will never get to hold her four newborns, dying shortly after giving birth to the quadruplets.

The baby names NZ knocked back in 2014

A New Zealander has tried to name their baby Senior Constable but didn't get away with it - and numbering children is also a no-no.

How can you go into labour without knowing you're pregnant?

For most of us, the idea that a woman could carry a child to full-term without knowing she is pregnant is mind-boggling.

Will you get to the hospital in time?

Worrying your baby will be delivered by the roadside is a common concern for many mothers-to-be. So how likely are you to be caught short?

Video: Funny 'Lips Are Moving' parody just for mums

Meghan Trainor's song 'Lips Are Moving' was already a hit, but now it's been turned into a hilarious parody that is set to be very popular with frustrated mums everywhere.

Out with the clutter

Decluttering by the numbers: take the 30-day challenge

Forget the 5:2 diet - Twitter's 30-day declutter challenge will have your house back in shape in no time (well, a month).

Parents, don't be too hard on yourselves

We need to stop damning parents of today, and embrace their appetite for knowledge instead.

Is my baby normal?

There are chubby Buddha babies and there are thin, smaller babies. Neither are right or wrong, they are all 'normal'.

When an older sibling starts school

When one child goes to ‘big school’ and leaves the other behind, it can cause deep upset. Here's how to make the transition easier.

Stray cat saves abandoned baby

They say dogs are man's best friend, but one cat has proven felines can be just as devoted to their human companions.

How strangers are helping a mum's wish come true after her death

A mum of five, Liz Marquez wanted to breastfeed her premmie son for a year. So when she passed away suddenly, her friends - and strangers - stepped in to help.

Win an Octonauts prize pack

To celebrate the launch of Octonauts Live! Operation Reef Shield, a spectacular underwater adventure live on stage, we are giving away an amazing Octonauts prize pack to one lucky fan.

Download now: Essential Kids Activity Finder app

Got bored kids? Quickly find the best activities for kids wherever you are in Australia with the Essential Kids app.

 
Advertisement
 
Advertisement
 
 
 

What's hot on EB

Stars help save choking babies

It's an important lesson to learn, but one that busy new mums and dads might overlook until it's too late.

New Girl star Zooey Deschanel pregnant

Actress Zooey Deschanel is expecting her first child with her producer boyfriend Jacob Pechenik.

16 times 'dad reflexes' saved the day

Of course, in some cases they may be the ones who actually got their child into a precarious position in the first place, but we'll ignore that for now.

Couple's 'non-traditional' pregnancy announcement goes viral

Knowing you are not the father of your pregnant wife's baby would usually indicate a rocky relationship ahead for traditional parents.

The trials and tribulations of identical triplet newborns

Pip Donnelly is still playing spot the difference with her newborn identical triplets, Isabelle, Georgina and Frankie.

Win an Octonauts prize pack

To celebrate the launch of Octonauts Live! Operation Reef Shield, a spectacular underwater adventure live on stage, we are giving away an amazing Octonauts prize pack to one lucky fan.

Earthquake baby thriving five years on

Jenny Alexis is lucky to be alive after spending four days buried in the rubble of the 2010 Haitian earthquake, but now she's a thriving five year old.

Please don't say I'm lucky because I was adopted

On the one hand I was having a regular life with friends and sports and sleepovers and school. But I was also always wondering: Did my mother love me? What was wrong with me?

An open letter to non-parents who offer advice on child-rearing

Kitty, when you’re the parent of my child you’re welcome to wade in with an opinion – but until then, I’d prefer you to have a supportive ear and a glass of wine ready.

Couple arrested over baby gun video

A US couple faces charges after investigators say they found mobile phone videos showing the woman's 12-month-old daughter putting a handgun in her mouth.

NSW Health dumps 10-year limit on frozen embryos

A 10-year time limit on storing frozen embryos that were created with donor sperm has been dropped by the NSW government.

How my happy-go-lucky husband became a monster

Sharan Nicholson-Rogers watched her husband change from a happy-go-lucky police officer into an unpredictable man prone to violent and emotional outbursts.

Dads-to-be experience hormonal changes, too

Dads-to-be experience hormonal changes in line with their pregnant partners, a new study shows.

'They were just doing their job': mum of toddler killed in police chase gone wrong

"They were just doing their job. I feel so sorry for them. It is all just too sad."

Miscarriages to be formally recognised by NSW government

Women who miscarry will be able to obtain an optional "recognition of loss" certificate as a formal recognition of their often heartbreaking loss.

Cafe cubby house 'too noisy' for neighbours

Teenage parties, domestic disputes, or raucous late night pubs are the things that usually come to mind when you think neighbourhood noise complaints.

Dad films baby playing with snake

Most parents would not consider a snake an appropriate playmate for their baby, but a US dad who filmed his daughter playing with a python has defended himself against criticism.

Clever breastfeeding products

Check out this range of products designed to help make your breastfeeding journey more enjoyable, manageable and convenient.

Win with The Boxtrolls

To celebrate the release of The Boxtrolls on 3D Blu-ray, DVD & Digital with UltraViolet, we're giving you the chance to win a Boxtroll stationary package and DVD.

 

Back to School Offer

Findababysitter.com.au

We've got you covered for this school year. Use www.findababysitter.com.au to meet local nannies now.

 
Advertisement
 
 
Essential Baby and Essential Kids is the place to find parenting information and parenting support relating to conception, pregnancy, birth, babies, toddlers, kids, maternity, family budgeting, family travel, nutrition and wellbeing, family entertainment, kids entertainment, tips for the family home, child-friendly recipes and parenting. Try our pregnancy due date calculator to determine your due date, or our ovulation calculator to predict ovulation and your fertile period. Our pregnancy week by week guide shows your baby's stages of development. Access our very active mum's discussion groups in the Essential Baby forums or the Essential Kids forums to talk to mums about conception, pregnancy, birth, babies, toddlers, kids and parenting lifestyle. Essential Baby also offers a baby names database of more than 22,000 baby names, popular baby names, boys' names, girls' names and baby names advice in our baby names forum. Essential Kids features a range of free printable worksheets for kids from preschool years through to primary school years. For the latest baby clothes, maternity clothes, maternity accessories, toddler products, kids toys and kids clothing, breastfeeding and other parenting resources, check out Essential Baby and Essential Kids.