Mortgage co asking for reason for outstanding loan

Hi all - Hope someone can help me be less paranoid :eek:. Out prospective mortgage company would like to know the reason I took out a 10K loan 3 years ago. I am worried in that I can't remember what the reason was (well I know I needed the money but can't remember if I told them it was for a car, building work etc). If I just say it was for a car, would the credit check thing have a record of what I originally wrote down (i.e I might have said building work) or is this just a formality that they have to ask for?

Cheers!
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  • Thrugelmir
    Thrugelmir Posts: 89,546
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    Is it possible that you used the money to consolidate debt? Lenders can view your last 72 months of credit history. So can see usage trends etc. Maybe worth getting a copy of your credit report ( £2 statutory, don't subscribe ) from Experian and seeing it what it contains.
  • benten69
    benten69 Posts: 366
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    Do you still have the paperwork for the loan? That should have details on it, and you can just tell them what it says. However I know for sure if I borrowed £10k just 3 years ago, I would know what it was for to this day, not like it was 30 years ago.

    Is the loan paid off? I'm assuming it's not, in which case can you really not remember what you spent that £10k on? If you genuinely can't remember where you spent £10k just 3 years ago, it won't look good to someone trying to lend you money.

    I don't THINK a credit check will reveal details of what the loan to that extent, but if you have nothing to hide, then just dig out the paperwork and give them the honest answer.

    As above though, your credit file can show that you had say £9500 in debt to 5 lenders, then all of a sudden all 5 lenders got paid off and you had 1 single £10K debt. That would scream "consolidation loan" to anyone looking at your credit file.
  • If it wasn't for a car don't tell them that it was as if they're the kind of lender to scrutinise like that they would probably ask for info regarding the purchase.

    Go into the bank or onto your online banking and find the £10k going into your account and then trace the money going out to see what you did with it.

    Out of interest, how much of a deposit are you putting down for this mortgage.....?
    I am a Mortgage Broker
    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it.
    This signature is here as I follow MSE's Mortgage Adviser code of conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • Could it have been for medical treatment for memory loss?
  • JimmyTheWig
    JimmyTheWig Posts: 12,199
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    Are you saying that you can't remember what you used the loan for?
    Or are you saying that there is a reasonable chance that you used the loan for a different reason than you told the lender when you borrowed it?

    They won't have the reason for the loan on your credit report. But if the banks are linked in any way then they will have it in their internal systems.

    If you answer to the best of your ability then that's fine. But if not then its mortgage fraud.
  • No, not memory loss, but application loss. I know what I needed it for: some consolidation, a car, and a wall and carpet, then a holiday! But I probably told the bank it was something simple like a car, or the building work. I'm pretty sure I wouldn't have mentioned consolidation and the long list though. It was 10K about 3.5 years ago and there is 2k left to go. My deposit is just over 25 %. My credit rating is well above average according to clearscore. Thanks all.
  • Thrugelmir
    Thrugelmir Posts: 89,546
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    Do you currently owe money on credit cards or other forms of finance agreement, other than the loan.
  • Thrugelmir wrote: »
    Do you currently owe money on credit cards or other forms of finance agreement, other than the loan.

    one card with a 0% balance of 9k. My salary is 40k and I have one house already with a LtV mortgage of about 60% on it... this new one is a BtL application.
  • JimmyTheWig
    JimmyTheWig Posts: 12,199
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    How do you have to answer them?
    Is it a form where you have to tick the appropriate box(es)?
    Or do you need to write a sentance?

    My thinking is that you should write
    "I used the loan for some building work, a car, some consolidation and a holiday."

    The benefit of that is that it is true.

    As far as I am aware there is nothing to say that you have to use a loan for the purpose that you borrow it for. But you do have to be honest about the reason for borrowing it.
    Lets say that you want to buy a car for £10k. You borrow the money from the bank. The bank ask why you want to borrow it. You truthfully answer to buy a car. They give you the money. Before you buy a car you hear that a relative who lives on the other side of the world is dying. You decide not to buy the car but to go and visit them with the money instead. There's nothing wrong with that.
    What would be wrong is telling them you wanted to buy a car, because you thought it would help you get the loan, when you knew all along you were going to use the money to see a relative.

    Sounds like you told a small lie to get the loan.
    Don't make things worse by lying more now.
  • Thrugelmir
    Thrugelmir Posts: 89,546
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    fatbadger2 wrote: »
    one card with a 0% balance of 9k.

    Only an assumption but my take (with a lenders limited eyes). From your credit history 3 years ago you borrowed £10k which appears to be for debt consolidation. Since then you have amassed another £9k of debt. The lender can see its a promotional balance transfer, and that it cleared other debts. So the current position is that you now £12k of debt. Over the past 3 years you've effectively overspent by £2k.

    The concern for the lender is then three fold. One that the deposit for the BTL is borrowed. Two is that you will continue to overspend on your lifestyle and get further into debt in the years to come. Three is that your ability to suffer any form financial distress in letting a property is severely restricted.

    Lenders now have a duty of care and responsibility. They won't underwrite regulated consumer business at any cost. Simply not worth the trouble when the regulators come to visit them.
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