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Been pre-approved for Natwest Loan?!
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# 1
MoneyMiser
Old 06-03-2008, 12:44 AM
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Default Been pre-approved for Natwest Loan?!

Hi All,

Just looking for some advice really. I have been with Natwest for over 20 years and have a credit card with them, overdraft and a small loan from them.

I got a call today from a manager asking me to come in for a review of my finances. This is proably because I have been in my overdraft for some time and even gone over it on occasions. I have two other credit cards which are paid from this account. I agreed to go in this Saturday for a chat.

They have said I have been pre-approved for a £12,500 loan. I could use this really to consolidate all my current debts including money I owe to my mother and have just one monthly payment. It would be a lot easier just having one payment.

What should I look out for and what can I do to get the best deal possible? Also would I be doing the right thing?

MM
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# 2
duffpaddy
Old 06-03-2008, 6:04 PM
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The best way to work out whether you'd be better of with a loan would be to calculate how much you're currently paying in interest for all your outstanding debt.

From what I gather in your post, it sounds like you have credit card debt, an overdraft and you owe money to your mum.

If you have credit cards, check what the APR is on them. They are typically quite high and unless you're in the business of being a 'rate tart' (i.e. someone who takes advantage of credit card balance transfer promotions) you'll be better off with a loan negotiated with your bank.

Overdraft rates can vary so it might be worth talking to your manager about renegotiating the rate of interest you are paying. However, I'd probably advise against extending any more than you have already as the idea is to get out of debt not further into it!

This next one may sound harsh but unless your Mum is charging you a larger rate of interest than the bank and she is not in desperate need for it, I probably wouldn't take out a larger loan to pay her back straight away. The reason being that whilst a larger loan would allow you to pay your mum straight away which is great, it ultimately puts you in a worse position as you'll have larger and possibly less manageable repayments to make to the bank which only they will profit from.

If your mum is in a financially sound position and can afford to receive the money from you in installments, then I'd take out a smaller loan to cover the credit cards and then I'd setup a monthly standing order to my mum. That way you'll ultimately be able to pay bigger chunks of money back to your mum that won't incur interest. After all, the bank of Mum and Dad do the lowest rate loans in the world If your mum is in a really financially sound position, then I wouldn't pay her back until I'd cleared all of my own debt. Sounds harsh but I'm sure your mum wouldn't want to drive you further in to debt if she knew you could pay her back in the future instead.

If you do decide to get a loan, try and negotiate a good rate. As you've been with the bank for a very long time you should be able to ask for a much more favorable rate than newer customers. If that doesn't work, bring along loan brochures from other banks and let your manager know you're thinking of taking out a loan elsewhere instead. They may decide to match the rate to keep your business or you may even find that your banks rate is not very good after seeing what's available elsewhere! Secondly, make sure you try and get a loan that does not penalise you for paying the loan back early. That way if you get a bit of extra cash you can put it towards your loan, or if a better loan is available in the future, you can change it.

One thing to look out when getting a loan are Payment Protection Insurance (PPI). This is an optional feature which can be bolted onto your loan to protect your monthly payments should you become redundant, ill or lose your main source of income. In such circumstances, PPI will cover your repayments. A lot of banks have gotten into trouble recently for mis-selling PPI to their customers so please read Martin's latest article on PPI and decide whether PPI is the right product for you. It can be a good or bad thing depending on which way you look at it however don't feel pressurised into taking out PPI as it is entirely optional. Banks are more likely to want you to take it out as it earns them more money. PPI will significantly increase the total amount of your loan you need to repay, however, if you find yourself in the position to require it, it could prove to be invaluable.

Hope that helps.
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# 3
MoneyMiser
Old 07-03-2008, 12:55 AM
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Fantastic!!

Thank you for that post, really helpful. Will let you know how it goes
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# 4
Cozworth806
Old 07-03-2008, 7:11 AM
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The other thing you can do is to take the money out and then put the excess capital into a savings account or isa until you need to pay it back. This is known as stoozing but as mentioned if you owe your mother £5k say you could arrange to pay her back the difference between the amounts between paying a £7,500 loan and the £12,500 loan.

Also don't be tempted to borrow up to the limit just because they say you can have it, only borrow what you can afford.
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