Unsecured consolidation loans ... do they still exist?

Tom_taxman1

I have been attempting to get an unsecured consolidation loan of approx. £20000 over a period of 42-48 mths

The purpose of the loan is to consolidate credit card debt, for which I am paying just over £ 700 per month at varying rates between 15.9 & 19.99%

However, as the credit card debt amounts are obviously reflected on my credit file, I have been unable to get a loan from any reputable organisation including my bank

I have no CCJ's or arrears - never have had and I always pay more than the minimum each month on my credit cards

I had a large personal unsecured loan with Bank of Scotland several years ago over a three year period (no arrears ever) and even they won't help me

I have a good income and am able to make the repayments - I just want to reduce the interest rate I'm paying

Anyone got any ideas? I have no credit card accounts offering competitive balance transfers either

Thanks

paddyrg

Start by reducing the credit limits on your cards - the problem is you cannot borrow over ~50% of your income, and available credit counts towards that. If the minimum payment is £700(!) then the card balance must be ~£20k? So you'd need to be earning £80k+ to borrow another £20k to clear the cards, but if you have unused credit available on the cards, it will probably push that over closer to £90k salary!

Consolidation loans are just loans, they can't force you to pay off existing debts, so they're treated as increasing your credit, not replacing it.

Tixy

A lot of people finf themselves in your situation Tom.

Unsecured loans do exist but as no lender can force you to use the new loan to pay off your existing debts or won't run the cards up again they will always assess your affordability based on you borrowing the new money and keeping all your existing debts.

As you have found the lenders you have approached think you will not be able to afford to service over £40k of debt.

In your situation the only thing really to do is to try to pay as much as possible off your debts to hammer down the total amount you owe. Once your debts are reduced a bit you might find you are able to get a loan or once the first card is cleared they may offer you a decent BT deal.
I would suggest you look at the snowball calculator and use that to help you ensure you pay the least amount interest possible by the way you structure your repayments - http://www.whatsthecost.co.uk/snowball.aspx

speedbird1973

paddyrg wrote: »

the problem is you cannot borrow over ~50% of your income, and available credit counts towards that.
.

I have over 200k "credit" available to me, and a 50k Salary. So not quitr correct Paddy

paddyrg

Lucky you? £200k unsecured credit on a £50k salary is exceptional. It will vary lender to lender, but 50% is a typical figure, 400% usually only secured (mortgage, etc) on an asset worth ~500%!

Tixy

Not quite correct maybe but the 50% is a useful ballpark figure in the current economic climate. There will always be exceptions where people can borrow more and of course there are still many people who have more credit available from before the banks tightened up, and people who use to fit that criteria but now earn less etc etc.

But to explain to people why they may be being rejected for consolidation loans its a pretty good guideline.