A loan the answer?

scottswald

hi, i have been pretty bad with money in the past but am sorting myself out.

i have a loan for 10,000 which has a terrible interest rate. the balance is actually 10500 now.

i'm paying in 300 pound a month but 170 pund is for interest. this makes it over 20% interest rate by my reckonings.

do you guys think i would be best off getting a better interest rated loan to pay it off? i'm hoping i can cut my interest down to under 60 pound per month....


please help me.

Tixy

Why were you only able to get a high interest rate before? What is on your credit report in terms of bad items? defaults? CCJS? Delinquent balances? Missed payments?

How long have you had this loan for?

How much do you earn and what other debts do you have?

What makes you think you will get a better APR now?

Chance of getting a £10.5k loan for £60 per month interest (ie an APR of 7%) are probably pretty low for anyone who doesn't have a spotless credit file.

scottswald

hi tixy,

i went through a very silly patch in my life and went for the first loan i seen, i didnt even try any others!

i've had the loan for about a year now, i wasnt paying at first, but i am now.

i earn 900 per month as plumber and about 500 a month for being a bouncer on weekends.

i have a credit card with 600 to pay off.

i think i could get a better rate purely because i'll look around this time...

scottswald

i have no ccj's etc.

had missed payments a while ago but not for the last 6 months or so.

not sure it credit rating has been vastly affected....

Tixy

Well if you are planning to apply for a credit product then first you always need to get your credit reports to see what it shows and in your case you need to know if you were given a defaults from when you were not paying the loan. Even late payments in the last couple of years will make it harder to get a loan.

However I think the main reason you will struggle is because a new lender will assess you based on your existing £10.5k loan and any other debts you have plus the new one of £10.5k. They cannot be certain you will consolidate so will always look at worse case and highest exposure.

And based on your salary I think they'll say you cannot afford £21.6k of debts.

If you are still thinking of applying then your own bank is usually a good place to start providing you have managed your account well, no gone over your limits etc.

scottswald

yeah, the credit card and loan are with llyods tsb.

i am banking with barclays now and have not had a single problem with them in over 2 years.

do you think they would take it into consideration if i explained the new loan was paying off the old loan?

RobertoMoir

scottswald wrote: »

yeah, the credit card and loan are with llyods tsb.

i am banking with barclays now and have not had a single problem with them in over 2 years.

do you think they would take it into consideration if i explained the new loan was paying off the old loan?

Well they might but there is no way to guarantee that you will, which is the problem.

You're not borrowing a total of £10k until you've actually paid off the first loan, you're borrowing £20k until the moment the payment on the first loan is completed... There's no getting around that. Nor that you would be borrowing more at that point than you earn in a year. And didn't you say something about not paying the loan at first - if those were payments you were supposed to have made but didn't then your credit history probably won't look pretty.

A bank has to consider this as a high risk, to do otherwise would be the very definition of "irresponsible lending".

Sorry to pour cold water on your ideas, and I wish you luck proving me wrong, but I don't think you'll find this one easy.

scottswald

ok, thanks, what would you guys/girls do if you were repaying a loan with an incredibly high interest rate?

scottswald

does it cost any additional costs to change from 1 loan to another ?

for example, if my interest rate is 22% now and my bank (barclays) would give me a loan at 10%, would it do me any harm to accept that then change again in 6 months if i happen to find a cheaper one again? (i know, very unlikely)

also, would this decrease credit rating?

zppp

You could ask Lloyds if they can refinance it for you. Alot of lenders have a refinance debt this bank option, and allows you to select to repay a loan account on the application, thus getting around the problem as other users have mentioned. (I know this as I process applications in a different bank, not sure if Lloyds do it though)

scottswald

im a bit confused by that zipp, im soooo in over my head!!!!