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  • FIRST POST
    • ryanm8655
    • By ryanm8655 11th Oct 16, 5:16 PM
    • 40Posts
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    ryanm8655
    Loan advice (high interest rate...)
    • #1
    • 11th Oct 16, 5:16 PM
    Loan advice (high interest rate...) 11th Oct 16 at 5:16 PM
    Hi there,


    Erroneously I refinanced a load of debt (overdraft, credit cards and an existing loan) a year ago with my bank (HSBC) and despite being told I'd get a rate of 5% on the prechecks I ended up being offered 16.9% or something ridiculously and stupidly accepted (at the time I was stressing about money and not thinking straight) but what is done is done...The loan was for £13000 in total, with total repayments of £19000 over 5 years...


    The repayment period is 5 years and I have a further 4 years of repayments at about £316/month.


    I have a new job and am now earning a fair chunk more than I was at the time and want to get it cleared asap so that I can start saving for a deposit for a house...


    I have no idea why I got such a poor rate, I've never missed payments for credit cards etc. Have had plenty of credit cards I've cleared in full, had a phone I have never missed a payment on since I first got one at 18...the only thing I can think of is I move a lot...(on average every 6months to a year) I live in London and so tend to move from flatshare to flatshare...I also wasn't on the electoral roll until about 6 months ago (well I was but at an out of data address). The previous loan I consolidated was at 8% which wasn't great but I thought it would improve as I was earning about 50% more than I earned when I took out that loan.


    I went into the bank to find out how much it would cost to clear the loan in full (I can pay back early but have to pay the amount in full) and while there checked to see if I could get a better rate but the rate I was offered was exactly the same...despite earning another 50% more than this time last year...


    Last week I went on a comparison site to check out loans and the one that it said I had the highest chance of approval with stated they were "unable to provide me with a loan at this time"...I had that day update my bank account address with my London address for which I am on the electoral register as I thought that would improve things so am wondering if there were issues finding my credit file...


    I have now signed up to Experian to see if there is anything dodgy on my file but am awaiting the pin to get started...


    Any ideas for what would be causing such a high rate and also how I can get the rate down?


    In an ideal world I'd like to take out a loan at a lower rate and pay it off over 2 years (@£550/month approx.)...


    I have credit cards with Santander that I rarely use so could see if they will give me a better rate loan, likewise I have a bank account with NatWest I only use for the travel/phone insurance and pay the monthly fee for so could try them...but I assume there is some fundamental issue with my credit file so there is little point...


    Worst case, I refinance at the same rate from HSBC but over a shorter period so that I pay back less overall...


    A bit of a mess...advice much appreciated...


    Cheers,
    Ryan
Page 1
    • PeacefulWaters
    • By PeacefulWaters 11th Oct 16, 5:26 PM
    • 5,078 Posts
    • 6,095 Thanks
    PeacefulWaters
    • #2
    • 11th Oct 16, 5:26 PM
    • #2
    • 11th Oct 16, 5:26 PM
    Unstable address history and loan purpose consolidation are your biggest issues. Longer term might not help either.

    Have you tried Ratesetter? Zopa? Admiral?
    Last edited by PeacefulWaters; 11-10-2016 at 5:29 PM.
    • ryanm8655
    • By ryanm8655 11th Oct 16, 5:35 PM
    • 40 Posts
    • 8 Thanks
    ryanm8655
    • #3
    • 11th Oct 16, 5:35 PM
    • #3
    • 11th Oct 16, 5:35 PM
    I haven't tried those but will check them out. EDIT: Zopa was the one I tried that at the prechecks (having followed a link from comparison sites) stated that they were "unable to offer me a loan at this time".


    I've also started cancelling credit cards I no longer use (I have about £9k available credit on them) as I heard this can have an impact?


    All I have tried so far is HSBC, but as they are my bank and also offer one of the most competitive loan rates I wasn't optimistic anywhere else would be better?


    Will it matter that I have recently updated my address with my bank? Previously I used my parents address and when I input my current address into comparison sites it says they are unable to find my credit file... Is there a time I need to wait for that address to be updated on the credit file?


    Thanks,
    Ryan


    EDIT: Just got a quote from ratesetters based on a soft search...rate of 10.9% and monthly repayments of £556.13 based on repaying over 24 months. That's an improvement but still high, and I am also wary it could increase if I click apply as a similar quote from HSBC was 5.5% and increased to 16.9% when I clicked apply...
    Last edited by ryanm8655; 11-10-2016 at 5:43 PM.
    • Gaz83
    • By Gaz83 11th Oct 16, 5:39 PM
    • 3,361 Posts
    • 6,357 Thanks
    Gaz83
    • #4
    • 11th Oct 16, 5:39 PM
    • #4
    • 11th Oct 16, 5:39 PM
    If your bank are comfortably receiving payments from you at a high interest rate, there's nothing to be gained (from the bank's point of view) from allowing you to refinance at a lower rate. Banks exist to make money for their shareholders.

    If you're looking to pay it off quicker at a higher monthly payment, why not just overpay?
    Last edited by Gaz83; 11-10-2016 at 5:53 PM.
    We’ve had to remove your signature. Please check the Forum Rules if you’re unsure why it’s been removed and, if still unsure, email forumteam@moneysavingexpert.com
    • ryanm8655
    • By ryanm8655 11th Oct 16, 5:50 PM
    • 40 Posts
    • 8 Thanks
    ryanm8655
    • #5
    • 11th Oct 16, 5:50 PM
    • #5
    • 11th Oct 16, 5:50 PM
    Fair point re: high street bank...


    I didn't realise overpayment was an option...


    But having read the loans section of this website (I wish I had done so sooner) I would have done...


    Can I do so without penalty?


    Thanks.
    • Gaz83
    • By Gaz83 11th Oct 16, 5:53 PM
    • 3,361 Posts
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    Gaz83
    • #6
    • 11th Oct 16, 5:53 PM
    • #6
    • 11th Oct 16, 5:53 PM
    You'd need to check the T&Cs of your loan agreement, but most loan agreements allow you to repay without penalty, although some limit the amount you can overpay by each year.
    We’ve had to remove your signature. Please check the Forum Rules if you’re unsure why it’s been removed and, if still unsure, email forumteam@moneysavingexpert.com
    • ryanm8655
    • By ryanm8655 11th Oct 16, 5:58 PM
    • 40 Posts
    • 8 Thanks
    ryanm8655
    • #7
    • 11th Oct 16, 5:58 PM
    • #7
    • 11th Oct 16, 5:58 PM
    Thanks. From reading the loans section it seemed like legally you had to be allowed to overpay by up to £8000 each year but I may have misinterpreted.


    Have just done an application through admiral so will see what happens...


    It would be so nice to be debt free within 2 years...
    • Gaz83
    • By Gaz83 11th Oct 16, 6:04 PM
    • 3,361 Posts
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    Gaz83
    • #8
    • 11th Oct 16, 6:04 PM
    • #8
    • 11th Oct 16, 6:04 PM
    Thanks. From reading the loans section it seemed like legally you had to be allowed to overpay by up to £8000 each year but I may have misinterpreted.


    Have just done an application through admiral so will see what happens...


    It would be so nice to be debt free within 2 years...
    Originally posted by ryanm8655
    You've also got to contend with the fact that many lenders will simply not trust that you'll use the 'new' loan to pay off the 'old' one, and thus they'll assess you based on potentially having twice as much debt as you already have.
    We’ve had to remove your signature. Please check the Forum Rules if you’re unsure why it’s been removed and, if still unsure, email forumteam@moneysavingexpert.com
    • ryanm8655
    • By ryanm8655 11th Oct 16, 6:05 PM
    • 40 Posts
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    ryanm8655
    • #9
    • 11th Oct 16, 6:05 PM
    • #9
    • 11th Oct 16, 6:05 PM
    Hmm...that's frustrating...


    Just reading about 0% cash transfer credit cards, which could be a way to reduce the liability of the loan and pay a chunk off early...did an eligibility check and my address isn't coming up on the credit bureau...it says if I have recently moved then it may take a month to update...
    • DCFC79
    • By DCFC79 11th Oct 16, 6:23 PM
    • 27,771 Posts
    • 17,534 Thanks
    DCFC79
    Sign up to Clearscore and Noddle too, Noddle is the least used of all 3 apparently.
    Je Suis Charlie
    • Thrugelmir
    • By Thrugelmir 11th Oct 16, 6:30 PM
    • 51,306 Posts
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    Thrugelmir
    Debt consolidation = High rate

    Statistically you are highly likely to reoffend i.e. continue to spend beyond your means or default.

    Nothing personal but that's the profile category you reside in currently.

    To help yourself. Watch the pennies and they'll make pounds. Use the pounds to overpay the loan. That way you'll pay a lot less interest and clear the debt quicker.

    There's no such thing as a free lunch. Everything has to be worked for.
    “A man is rich who lives upon what he has. A man is poor who lives upon what is coming. A prudent man lives within his income, and saves against ‘a rainy day’.”
    • ryanm8655
    • By ryanm8655 11th Oct 16, 6:37 PM
    • 40 Posts
    • 8 Thanks
    ryanm8655
    Hmm...I guess that would explain the leap from 8-16% within a couple of years when I increased my debt and consolidated.


    I have a regular saver set up into which I pay £250/month which matures in March, it currently has about £1500 in. Perhaps I could use this to overpay...
    • zx81
    • By zx81 11th Oct 16, 6:44 PM
    • 9,397 Posts
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    zx81
    Unless you're getting more than 17% on the regular saver, use it to over pay immediately.
    • ryanm8655
    • By ryanm8655 12th Oct 16, 9:06 AM
    • 40 Posts
    • 8 Thanks
    ryanm8655
    So I woke up to a declined application from admiral...think I should probably wait a month until my credit file has updated...

    Re: using savings to clear it sooner...My gf and I will be moving in together in March so this would wipe out my savings for a deposit etc. I know financially it makes sense in the long run but in the short term it reduces my liquidity...I will also need to buy a cheap car around then (I am currently carless) as I will no longer be living in London (I'm in a wheelchair so a car is pretty essential outside London). So my concern is that I will then have to dip into my overdraft in March.

    Though if I do refinance the debt I think I will reduce the amount with savings as the reduction in repayments will have an impact monthly.

    I think perhaps I need to do a proper budget, save as much as possible between now and March having done that budget, and revisit the situation then perhaps in terms of reducing it down...
    • foxy-stoat
    • By foxy-stoat 12th Oct 16, 8:06 PM
    • 1,175 Posts
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    foxy-stoat
    You cannot borrow your way out of debt, just over pay by £200 a month and see where you are in a years time.

    You won't get a better rate as the purpose will be for debt consolidation.
    • ryanm8655
    • By ryanm8655 13th Oct 16, 9:27 AM
    • 40 Posts
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    ryanm8655
    I see where you are coming from, but the fact that the rate is higher than the rate on my £5k overdraft, and most of the £9k available credit I have on cards I don't think it is crazy to think I can find a better rate. (I know it was a dumb decision to take the loan/rate at the time when it was worse than all of my various smaller bits of debt but at the time I was going through considerable mental strife and wasn't thinking clearly, I just wanted one payment so that I knew how much I had each month and that I would be debt free one day...)


    Likewise my income has increased considerably since then too.
    • Gaz83
    • By Gaz83 13th Oct 16, 10:11 AM
    • 3,361 Posts
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    Gaz83
    I see where you are coming from, but the fact that the rate is higher than the rate on my £5k overdraft, and most of the £9k available credit I have on cards I don't think it is crazy to think I can find a better rate. (I know it was a dumb decision to take the loan/rate at the time when it was worse than all of my various smaller bits of debt but at the time I was going through considerable mental strife and wasn't thinking clearly, I just wanted one payment so that I knew how much I had each month and that I would be debt free one day...)


    Likewise my income has increased considerably since then too.
    Originally posted by ryanm8655
    This is where you are going wrong.

    You are not a good risk for a lender. You already have considerable debt, and you've tried to consolidate once before, which hasn't worked, only a year ago.

    You are not going to be offered a low rate. You need to realise this.
    We’ve had to remove your signature. Please check the Forum Rules if you’re unsure why it’s been removed and, if still unsure, email forumteam@moneysavingexpert.com
    • Candyapple
    • By Candyapple 13th Oct 16, 10:16 AM
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    Candyapple
    How much is your annual salary?

    Problems I can see:

    1. You have a loan for £13k and £9k available on credit cards and want to take out a further loan to clear the £13k. Unless you are earning circa £70k you will fail on affordability.

    2. Being on the electoral roll does help, but it takes time to build up history and most companies like to see stability so at least 3 years minimum at one address/being on the ER.

    3. It can take 1-3+ months for any information to be updated with the credit reference agencies. Let's say you closed down all your cards with the £9k available, it may still take up to 3 months for this to be shown on your credit reports. Don't forget you will need to check with all 3 (Experian, Equifax and Call Credit) to make sure they are all the same.

    4. Lots of applications in a short period of time makes you look desperate and will definitely affect your credit history.

    Solutions:

    1. Close any unecessary accounts/credit cards which you aren't using.

    2. Any savings accounts you have, use them to clear off the loan debt.

    3. Don't make anymore applications.

    4. In 3 months time pay £2 to Experian to check your credit report and sign up with Noddle and ClearScore to check monthly for free whether your accounts are showing as closed/electoral roll info appearing etc.
    5. Work out a budget and throw as much money as you can towards this loan debt and then perhaps in 6 months time check a loan eligibilty site whether your situation has improved because at the moment all you are doing is setting yourself back further and further with each application.
    • ryanm8655
    • By ryanm8655 13th Oct 16, 11:26 AM
    • 40 Posts
    • 8 Thanks
    ryanm8655
    Thanks for the replies.


    Agree with the above approach. Seems sensible.


    Disagree with the post saying that consolidation previously didn't work, my debt has gone down since then so it did work...but because the interest rate is so ridiculous a year of paying circa £320/month has only reduced the amount of debt by about £1k, everything else has been interest. Now I want to get rid of it more quickly and pay less interest overall, that is the reason for another loan, not because I need more cash. Not that I am saying you are wrong to say I won't get a better rate, perhaps I won't, but I don't think it's crazy to think I could...and if I am such a high risk why on earth do I keep getting money chucked at me (credit cards and overdraft limits get increased).


    To be fair 12K was the amount to settle the loan about 3/4 months ago, it is probably a bit less now and I also have savings of about £1500 so a £10k loan would do it.


    My gross income is about £46K.
    • -taff
    • By -taff 13th Oct 16, 11:37 AM
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    -taff
    If your gross income is 46k, why are you not overpaing anyway? £320 is nothing a month out of that wage, you could have easily paid double, while you waited for a better deal.

    Banks don't exist to be nice to people, they exist to make money, they are making lots of money off you, hence being chucked credit.
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