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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 2
    • NorthernMonkey1
    • By NorthernMonkey1 13th Oct 16, 11:49 AM
    • 139 Posts
    • 572 Thanks
    NorthernMonkey1
    My HSBC personal loan allowed unlimited repayments, but the total amount owing is not recalculated until you ask for a settlement figure.

    You should increase your payments to the maximum possible by reducing your spend, and use your low interest savings to repay your high interest debt.

    You can also continue to complain about the high APR, but do so in the knowledge that you're completely wasting your time.
    • Gaz83
    • By Gaz83 13th Oct 16, 11:53 AM
    • 3,357 Posts
    • 6,346 Thanks
    Gaz83
    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.
    Originally posted by ryanm8655
    You can disagree all you want, but that is how a lender is going to see you.

    A year ago you borrowed money to pay off other debts. Now, a year later, you're looking to... borrow money to pay off other debts.

    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
    Originally posted by ryanm8655
    As you have found, no lender is willing to lend to you at a lower rate.

    ...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).
    Originally posted by ryanm8655
    I didn't say you were high risk, I said you didn't have a good risk in terms of lending you money at a lower rate than you're already getting.

    If you're paying back money on time, without missing payments, then it's not hard to see why they keep offering you products - they're making (not inconsiderable) money from you.
    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 13th Oct 16, 11:59 AM
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    ryanm8655
    Because it was £10k less about 3 months ago, and I didn't know I could overpay without penalty until reading on here on Sunday.


    Absolutely, which is why I don't think it's crazy to think another bank might offer a slightly better rate so that they can make the money instead of HSBC.


    On an affordability note, I took out an £8k loan about a year post graduation when I was earning £22k and had exactly the same credit cards and was maxed out on my £3.5k 0% interest student overdraft, I'd say my situation is considerably better now yet the rate I get offered is worse despite interest rates declining in that time...but I guess the fact I consolidated and my debt situation hadn't improved in 2 years wouldn't help...
    • Gaz83
    • By Gaz83 13th Oct 16, 12:09 PM
    • 3,357 Posts
    • 6,346 Thanks
    Gaz83
    Absolutely, which is why I don't think it's crazy to think another bank might offer a slightly better rate so that they can make the money instead of HSBC.
    Originally posted by ryanm8655
    You're stuck between a rock and a hard place, though.

    Taking out a new loan with the same bank = no incentive for the bank to give you a loan at a lower rate as it will result in them making less money

    Taking out a new loan with a different bank = no guarantee you will use the new loan to pay off the old one, possibility you will end up with twice as much debt

    You may think this is crazy, lenders don't.
    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 13th Oct 16, 12:23 PM
    • 40 Posts
    • 8 Thanks
    ryanm8655
    You can disagree all you want, but that is how a lender is going to see you.

    A year ago you borrowed money to pay off other debts. Now, a year later, you're looking to... borrow money to pay off other debts.


    As you have found, no lender is willing to lend to you at a lower rate.


    I didn't say you were high risk, I said you didn't have a good risk in terms of lending you money at a lower rate than you're already getting.

    If you're paying back money on time, without missing payments, then it's not hard to see why they keep offering you products - they're making (not inconsiderable) money from you.
    Originally posted by Gaz83

    Not strictly true...I've tried two other lenders (one just a pre-check) and they were unable to offer me a loan at all which is likely down to the fact I have just updated my address and this hasn't been reflected on my credit file (pre-checks for comparison sites confirm this as they couldn't find my credit file so were unable to assess my suitability). I haven't tried anyone else...ever...only HSBC...


    I disagreed that consolidation hadn't worked, my debts haven't increased, I'm not looking to borrow more, I am looking to borrow less than I borrowed a year ago in order to get a better rate. I have no idea what detail lenders will go into but that doesn't show that the consolidation didn't work...if they did review it surely they would note I have met all the payments and the debt has gone down. There must be plenty of people who consolidate their debts to get a better rate and are successful? I might not be but I find it hard to believe that no one has ever been able to get out a new loan to clear an old one and lower the interest rate they pay...


    Likewise if other lenders can see that I am paying back on time without missing payments then surely they'd be interested in undercutting HSBC (particularly as the rate is higher than a credit card, I was recently accepted for a credit card with the post office that I applied for as it was 0% fees abroad btw) and making that money themselves?


    I'm not being facetious...


    My financial situation has improved, my income has increased and level of debt has decreased...once my credit file has been updated and I have used savings to clear down the debt I don't think it is unrealistic to think some lenders might be able to offer a better rate than HSBC did previously for a higher amount and with a considerably lower wage...I might not be able to but time will tell...


    Thanks all for the advice.


    Will update in a due course, lower rate or not.

    EDIT: I agree re: rock and a hard place, I don't think that's crazy, seems perfectly logical that lenders might see things that way. In which case the answer is pay it down to get myself back under the affordability threshold I guess...
    Last edited by ryanm8655; 13-10-2016 at 12:27 PM.
    • -taff
    • By -taff 13th Oct 16, 1:02 PM
    • 6,458 Posts
    • 3,731 Thanks
    -taff
    You've got a 13k loan, you're looking to borrow 10k, that takes you to 23k, half your income, [there is no guarantee you'll pay off your current debt with it].
    You're a high risk.
    • ryanm8655
    • By ryanm8655 13th Oct 16, 1:23 PM
    • 40 Posts
    • 8 Thanks
    ryanm8655
    Reading another thread it seems HSBC are a notoriously fussy lender...


    Definitely need to shop around in a few months...
    • ryanm8655
    • By ryanm8655 18th Oct 16, 7:23 PM
    • 40 Posts
    • 8 Thanks
    ryanm8655
    Bit of an update on this...found out I have £11730 to pay on the loan if I settle the debt now...I have £1750 in a regular saver and could also go into my overdraft to reduce this further if need be (the rate is a bit better than I have on the loan as I have a HSBC advance account so get a better rate).


    Plan is to use the savings to reduce the loan.


    I had booked an appointment with Santander to open up a 123 cashback account, and am also going to enquire about a loan and see if they can do a better rate (have heard they are less fussy than HSBC when it comes to lending and I used to bank with them/still have credit cards with them that I always pay off in full each month).


    Question...£10k loan would be sufficient to pay my current loan, if I were to use my overdraft to reduce the loan to £9k could this improve the rate I get offered compared to borrowing £10k? I plan to pay it back over 24 months, if not sooner...


    Worst case scenario I'll clear down the HSBC debt using savings/overdraft as much as possible and refinance the remainder over 2 years with HSBC at the same rubbish rate...


    Thanks,
    Ryan
    • zx81
    • By zx81 18th Oct 16, 7:39 PM
    • 9,358 Posts
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    zx81
    Stay out of your overdraft - that's likely to make things worse if you end up living in it for any length of time.
    • enthusiasticsaver
    • By enthusiasticsaver 18th Oct 16, 7:52 PM
    • 2,555 Posts
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    enthusiasticsaver
    Hmm. I am not sure a Santander 123 account is good for you at the moment. Try the Santander 123 lite. Lower fee.
    Debt and mortgage free and saving for early retirement
    • redux
    • By redux 18th Oct 16, 9:33 PM
    • 15,563 Posts
    • 18,363 Thanks
    redux
    Pay the savings account off against the loan, don't use the overdraft, and increase your monthly repayments by £200 or £300 a month.

    That will test whether you can pay it back in 2 years, and already halve the remaining interest if you do.

    Maybe after several months of that might be a better time to see if a lower interest replacement would be available, but on the other hand it will be most of the way through the interest by then anyway.
    • ryanm8655
    • By ryanm8655 18th Oct 16, 11:52 PM
    • 40 Posts
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    ryanm8655
    Why isn't 123 account a good idea? The cashback more than covers the fee?

    I can definitely comfortably afford to pay £200/£250 more a month. That rate will also enable me to continue to save, so I could probably afford to pay off more...but paying off over 24 months gives a little more leeway in the budget.
    • Gunther Golf
    • By Gunther Golf 19th Oct 16, 8:55 AM
    • 62 Posts
    • 35 Thanks
    Gunther Golf
    It absolutely is possible to access a debt consolidation loan at a reasonably low interest rate. My partner borrowed £20k from AA Loans (Bank of Ireland) 3 months ago for the purpose of debt consolidation which was stated on the application as the purpose of the loan. Representative APR was 3.9% and they offered a loan for £20k at 5.9%

    Much healthier than the 16.9% that the OP is paying currently.

    There ARE options depending on your personal circumstances.
    Last edited by Gunther Golf; 19-10-2016 at 8:58 AM.
    • Pixie5740
    • By Pixie5740 19th Oct 16, 10:45 AM
    • 8,861 Posts
    • 11,880 Thanks
    Pixie5740
    Why isn't 123 account a good idea? The cashback more than covers the fee?
    Originally posted by ryanm8655
    The Santander 123 account offers cashback for household bills and interest on credit balances up to £20k and cost £5/month. The Santander 123 Lite account offers cashback on household bills and costs £1/month. As of 1st November the interest rate for credit balances up to £20k in a Santander 123 account is dropping from 3% to 1.5% which could mean you'd be better off with the Lite account instead.

    Edit: Are you getting value for money from your NatWest account? Could you get the same cover for less elsewhere or buying separate insurance policies?

    Have you signed up for Experian's expensive Credit Expert product. If so cancel it once your free trial is over and save yourself £14.99 a month.

    Consolidation isn't necessarily a bad thing if you can make your debt cheaper. That doesn't just mean getting a lower rate because a lower rate over a longer term can actually make the debt more expensive. It's not that consolidation is bad as such, it can work providing you have tackled the root cause of the debt and have started budgeting properly.
    Last edited by Pixie5740; 19-10-2016 at 10:51 AM.
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • ryanm8655
    • By ryanm8655 19th Oct 16, 12:24 PM
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    • 8 Thanks
    ryanm8655
    Ahh I see...didn't know about the 1,2,3 lite...


    I don't think I could get the same cover for less elsewhere but am thinking of cancelling the Natwest account regardless...certainly in the short term as I rarely use the tastecard, have no holidays planned until summer next year, and won't have a car until early next year so the breakdown cover is pointless...the only thing I really use is the phone insurance...


    I have signed up to Experian so will make sure I cancel...


    This time I am planning to reduce the repayment period as well as interest rate (if I can). I am even considering repaying over 12 months (I could afford it but would need to cut back - there is room for cutbacks but it would involve a change of lifestyle i.e. far less eating out, cutting back on drinking, and no holidays next year (other than the 2 week trip to Thailand for which I have already paid, though will need spending money...).


    Plan to complete the budget spreadsheet from the debt section (when I manage to find it...).


    Thanks,
    Ryan
    • Pixie5740
    • By Pixie5740 19th Oct 16, 12:54 PM
    • 8,861 Posts
    • 11,880 Thanks
    Pixie5740
    This is the statement of affairs calculator that is commonly used on the Debt Free Wannabe board.

    I've been on NatWest's website and I reckon you must be paying at least £12 a month for the account. You say you don't use the taste card so that's no benefit to you. If you are under 65 then I think you'll be able to get travel insurance for you Thailand trip for less than £24.

    http://www.moneysavingexpert.com/insurance/cheap-travel-insurance#annual

    Mobile phone insurance you can get for less than £6 a month.

    http://www.moneysavingexpert.com/insurance/cheap-mobile-phone-insurance

    So even though you're planning to close your NatWest account you can still get all the cover you need.
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • enthusiasticsaver
    • By enthusiasticsaver 19th Oct 16, 2:07 PM
    • 2,555 Posts
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    enthusiasticsaver
    The reason I advised Santander 123 lite is that the fee is lower (£1) rather than the £5 the Santander 123 charges. The Santander 123 is ok if you have savings of £10-£20k as it pays 1.5%, currently 3% but if you have little savings it makes no sense to have it. Go for the lite version instead and save yourself £48 per year.
    Debt and mortgage free and saving for early retirement
    • ryanm8655
    • By ryanm8655 19th Oct 16, 2:28 PM
    • 40 Posts
    • 8 Thanks
    ryanm8655
    cheers! Didn't realise lite exists!
    • ryanm8655
    • By ryanm8655 21st Oct 16, 2:16 PM
    • 40 Posts
    • 8 Thanks
    ryanm8655
    Update...


    Opened a 1,2,3 lite account...


    Also applied for a loan of 10K, rate offered was high (13.49%) but less than HSBC (16.9%) and reduced the repayment period to 2 years (from 4 years) so overall about £150/month more to pay but save about £3/4k in interest...so I can save money by consolidating after all...


    Rate Setters offered 10% at the Pre-app stage so will see if I can get that rate otherwise go with Santander...
    • ryanm8655
    • By ryanm8655 21st Oct 16, 5:26 PM
    • 40 Posts
    • 8 Thanks
    ryanm8655
    Ok so I've now been accepted for a ratesetters loan of £10k @11.1% (10.9% was for £12k...).


    Is there any reason to go for the Santander loan over ratesetters? I.e. any hidden costs I'm missing or anything?


    I am going to want to overpay in all likelihood...


    Thanks,
    Ryan
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