Help with loan application

tds

Hi everyone

I would like some help with my loan application. I want the loan to pay off my credit cards and be better off. On the application form it asks the question what is the loan for. Is it better for me to say I want the loan for something other than paying off my cards. Usually the question has a drop down menu and the option says "debt consolidation" this does not sound very good to me. It gives the company a bad impression that I am in lots of debt. Although technically I am, but am not struggling to pay. If I don't tell them about my credit cards will they find out from a credit search anyway. Any information about this would be gratfully appreciated.

tds

Astaroth

Putting anything other than the true reason for the loan would be fraud for one.

Secondly if you do not say it is for debt consolidation then they will look at your current lines of credit (max and current outstanding) and add the loan to it... so if you had 2 cards at £5000 each and were asking for a £10000 loan and said it was for a new car they would ask themselves if you could afford to be paying off £20000 of debt. Whilst saying that you are going to be using it to consolidate debt doesnt mean that they dont consider your credit lines presently available (after all you could either be saying this fraudulantly or saying it honestly but then not intend to cancel the other lines) it does tend to put it in a slightly better light in regards to total credit available.

cjm2508_2

First and foremost I think honesty is always the best policy in these instances, but very very few banks use this as a scoring criteria as most people use a loan for more than one thing (i.e. £10,000 loan paying off £5,000credit card, £2,000 overdraft, £1,000 new tv for world cup, £2,00 holiday...)

However, Astaroth's spot on - they will take into account your existing debts and if you do opt for debt consolidation may insist on transferring the money to the debtors direct.

tds

Thank you very much for the information. I never even thought about it being fraud:o I just wanted the loan company to think good of me to give me the loan. I wouldn't mind if they paid the money direct to my credit cards. I would really enjoy cutting them up. I have done a credit check and it is excellent according to Experian. What information does Experian etc give to loan companies about me. I know my credit files contain lots of info as I have received one recently, but what is only for my personal info and what is for loan company information. It does not tell you on the leaflets they send. I am confused about this issue. Do Experian give you a credit score according to what they know about you ie 1 being good 10 being bad etc. Or do they actually give out the company you owe money to and how much etc.

Any info would be much appreciated.

Rafter

tds,

The score experian give you is only indicative and is no guarantee you will get a loan.

Each lender has its own 'scorecard' and may apply different weights to different risk factors. Where you live, how long you have been in your current job, existing debt, homeowner, married, etc etc etc, in fact anything that they ask you on the application or on your experian file could be 'scored' in their decision.

Better to be honest as you say. Better to cut your credit cards up! Better to get a flexible loan to avoid penalties if you can pay the loan off sooner. Don't back down to the hard sell for protection insurance - you can get it a lot cheaper elsewhere if you really want it.

Check out Martins articles too to see if a 'life of balance' credit card might be a cheaper option for you.

Good luck.

R.

bert&ernie

The credit reference agency (CRA) will provide the lender with some or all of the information that you have seen on your credit file. There are some exceptions e.g. some searches are not disclosed to lenders. The CRA may also disclose data relating to third parties - people financially associated to you by way of a joint financial commitment.

The CRA will either provide just the raw data or, more likely, add a "block" of summarised data from your file. They may also provide a variety of scores for the lender to use.

The lender will take the information that you have provided and the data from the CRA and will put this into its own scorecards to calculate its own scores. Their lending strategy will also take into account a variety of policy rules e.g. they may always decline unemployed people regardless of credit score. Even if you pass all the policy rules, your score must reach the cut-off for the product.If it is below they may offer you an alterative product/price with a lower cut-off (and typically higher fees) or will decline your application. Borderline cases will be referred to a trained underwriter for a manual assessment.

Its not always simply down to creditworthiness either - you may simply not fit with the customer profile they are looking to sell a particular type of product too. For instance, many lenders are actively seeking identify the potential lifetime value of a customer rather than simply the likelihood that you will repay your borrowing.

As for the propose of a loan, this information is very difficult to verify and is therefore not likely to have a significant effect on the overall decision.

Experian_company_representative

Well said bert&ernie!