Where best to apply for a Loan

Gopes

My flatmate is thinking of applying for a loan of about £20k.
Basically, his parents lent him money to help him through his degree and subsequent masters, however the due to a change in their circumstances (retirement), my flatmate feels it is time to pay them back.
He is on a salary of £28k plus bonus (about 10% p.a.), his credit rating looks reasonable (a couple of missed payments on CCs, but both times was due to mistake, rather than being unable to pay).

He (we) is a private tenant in London - has been in our current flat for more than 2 years, and is on the Electoral Register. His rent is £355 per month. All said and told, his current outgoings are about £1100 per month, and his net income is about £1800, so meeting the repayments on an unsecured loan shouldn't be a problem.

He now has no CC debt, but recently took a £5k loan with egg (at 7.9% - the outgoings figure of £1100 above include repayments to this loan) to pay off the CC (after his second missed payment, he decided that it was better this way).

He is a bit naive when it comes to this sort of thing, and I said I would do a bit of research in an attempt to make sure he doesn't get rejected (or worse, ripped off) by a lender.

Anyway, the question is:
a) Based on a salary of approx £30k inc bonus, with disposable income after living costs of approx £700, is he likely to be able to get a £20k loan (only current debt is existing egg £5k)
b) He was rejected by Northern Rock for the £5k he eventually took with egg a few months back. I know Northern Rock have a reputation for being very picky with whom they offer loans to. Any suggestions for some good value lenders who are more likely to lend.
c) On the grounds that he already has an egg loan - would it make sense to appy to them for the larger loan.
d) Would he be better off just applying to Natwest, where he banks. He has been with them for about 7 years, and since his salary is paid in there, they might be more likely to give him a loan, even though their rates are not that competitive.

My opinion (not based on personal experience) would be to go for one of the providers who offer guaranteed rates - both Lombard Direct and Nationwide offer 6.4% - this would ensure that he doesn't get accepted and a ridiculously high rate that he wouldn't want to take. If he gets rejected, then I was going to suggest that he goes with Natwest - rather than get into a spiral of rejections, which damage his credit rating.

Finally, I was going to suggest that he initially takes out PPI with the lender. However, as soon as he is accepted, he would cancel the PPI (I believe that all forms of insurance have a mandatory period in which the policy can be cancelled - is that correct?). Thinking being, that whilst technically, a lender should not diffentiate on two applications based on whether the applicant his taking PPI or not, it would seem to make sense to do the above?

Thanks everyone for your input on this.
Regards
G

AMILLIONDOLLARS

I think rather than make repayments for this new loan to say Nationwide, he sets up a standing order and pay the money to his parents,
having a quick look on the Nationwide Website (again today) repayment for £20,000 over five years including PPI works out at £463.64 total repayable £27,818.80, or without PPI £388.70, payable £23,322.00. I am sure that his parent would appreciate it more if he did not put himself into this sort of debt for them. Was there an agreement that he pays them back? If not, I am sure that they would be delighted with a £500 gift every month from their son, NO interest attached!!!

Gopes

Actually, he is nominally paying them 5% interest on the loan anyway - although they haven't explicitly asked for it. He is adamant that he wants to get it sorted and pay them off.
I'll pass on your comments though.
Any comments on the likelihood of his getting a loan through one of the options above?
Thanks
G

shopsalot

i beleive banks also look at the debt/income ration of customers (as well as affordability) if he already has 5k, this would take him to 25k. I am not an expert but I dont think a lender will risk at 83% of his income?

I agree with the other post - maybe best just to pay them monthly, or take a 10k as good will gesture.

Gopes

Thanks chaps - I will pass your opinions on. Do banks not look at affordability - i.e. If he has £700 a month left after normal living expenses, it would appear that paying £350 or £400 a month towards his loan is perfectly manageable.

I do agree though, that maybe a loan for part might be adviseable.

Thanks
Gopes