Loans and credit score

JMH204

My daughter has taken out a loan to buy small piece of land - the sale didn't materialise - should she put the money into a savings account while looking around for another piece of land? If she pays it back now and then gets another one later will that go against her credit score. Also the loan she has is 14% so would it be best for her to pay this back now and get a cheaper loan. She is worried that all this loan activity will go against her. Any advice would be most welcome
Thank you

BLT_2

JMH204 wrote: »

My daughter has taken out a loan to buy small piece of land - the sale didn't materialise - should she put the money into a savings account while looking around for another piece of land? If she pays it back now and then gets another one later will that go against her credit score. Also the loan she has is 14% so would it be best for her to pay this back now and get a cheaper loan. She is worried that all this loan activity will go against her. Any advice would be most welcome
Thank you

If she pays back the loan now she will get charged either 1 or 2 months interest on the loan at 14%. If she puts it into a savings account she will get 4% max. It depends whether she believes she can get another piece of land.

The point to remember is that in the early stages of a loan a large part of the repayment goes towards the interest. If you have to dump a loan, dump it in the early days.

I dont believe a satisfactorily repaid loan would impact on your daughters credit score, but I'm not an expert

JMH204

Thank you - but if she pays it back now then finds some land in a few weeks and has to then take out another one - would that not harm her credit score. Also do you think she could enquire about another cheaper loan whilst she still has this one, just to be safe.
What I didn't mention is, she has only just got the loan on the 27th of this month.
Thank you

BLT_2

JMH204 wrote: »

Thank you - but if she pays it back now then finds some land in a few weeks and has to then take out another one - would that not harm her credit score. Also do you think she could enquire about another cheaper loan whilst she still has this one, just to be safe.
What I didn't mention is, she has only just got the loan on the 27th of this month.
Thank you

In which case she should still be in the cancellation stage and shouldn't get charged if she cancels the loan, although you would need to ring the firm to confirm this.

As to her credit score, obviously it will have been impacted by the loan, and currently it may be on her record as a 14k loan, in which case any potential lender may see her as trying to increase her exposure to 28k, thereby resulting in a rejection and subsequent impact on her credit score