How banks check what you spend your personal loan on?

starosta

Hi all,
I am thinking about taking a loan of about £15K-£20K to buy a property abroad for cash. I'd like it to be my investment property. I've noticed that lenders dont allow you to take loan for investment purposes, including property purchase. So my questions are:
- do I have to declare what I am going to spend the money on?
- Are they able to control/check what I am spending the money on?
- Do they check what I purchased?

I would prefer to take a personal loan because I can get a better price on the property by buying for cash and I don't have to secure the loan against the property, so it's mortgage free.

I would be grateful for any piece of advice and answers to my questions.
Cheers!

Apples2

Are you earning 45k plus with an impeccable credit history and no current debt or available credit?

paddyrg

They can't know, unless it is something silly like you take a loan to use as a deposit, then apply for a mortgage - then they will put 2 and 2 together.

But they probably will ask as a part of the application, and providing misleading information could be fraud if it gets messy later.

But Apples2's question is right to the point - do you stand any chance of getting this loan?

starosta

No, I don't earn £45K+, credit history ok'ish, without any setbacks, don't have a debt, have 2 credit cards, used rarely, and if used, paid fully the same month.

Thanks paddy, I should be able to get £15K without huge hassle, (I had a short chat with the bank) then its just a matter of the level of interest. But before I start to shopping around I want to get some more info, as I don't want this to be too messy or too risky.

paddyrg

Great, but be aware too much shopping around looks suspicious and makes lenders jumpy. £15k loan plus some cards (even unused credit limits will count) plus an ok-ish credit report, it would be exceptional to give you that loan if you were earning under about 35-40k. You can make life easier by removing any unused credit limits, overdrafts, etc you have so your total exposure is lower. Your bank will probably offer the best rate, fwiw, as they know your financial history. If they are prepared to lend you that much without security, bite their hand off.

starosta

Thanks for the reply and the tip with overdrafts, I don't use it at all so will cancel.
So generally you say I should be pretty safe taking those money and buying property abroad for cash?
I will do some online comparison and will contact providers of 1-2 best offers and then will try to get better interest rate.

opinions4u

Just for clarity, misleading a lender on the purpose of loan is fraud.

Don't kid yourself that it's ok.

Apples2

Just how loud are the alarm bells ringing that you would buy on overseas property for cash??

How well do you know this scheme?

What recourse do you have if it all goes belly up after you have parted with the cash?

starosta

opinions4u wrote: »

Just for clarity, misleading a lender on the purpose of loan is fraud.

Don't kid yourself that it's ok.

Apples2 wrote: »

Just how loud are the alarm bells ringing that you would buy on overseas property for cash??

How well do you know this scheme?

What recourse do you have if it all goes belly up after you have parted with the cash?

Thank you both for the replies.
1) I'm not saying fraud is ok. I never did. I just hope they won't ask the question. I don't want to lie. In the end I just dont like the way banks think they can direct our lives. It shouldnt make a difference for them...I get the money, I repay it in a timely manner.

2) I'm not much worried about the purchase itself. I am looking for a good renting property, best sold by the private owner. I am looking for a property in my motherland, and within my best friends there I have people who can assure the purchase is as safe as possible. So I am not worried about this part at all.

paddyrg

Why not look at lenders in your motherland in that case? You may be able to get a buy-to-let mortgage based on your earnings status here more easily than an unsecured personal loan

opinions4u

starosta wrote: »

Thank you both for the replies.
1) I'm not saying fraud is ok. I never did. I just hope they won't ask the question. I don't want to lie. In the end I just dont like the way banks think they can direct our lives. It shouldnt make a difference for them...I get the money, I repay it in a timely manner..

Purpose of loan does make a difference to the lender. They know that certaint types of loan are less likely to be repaid. So it is very much the lender's business to know what THEIR money, provided by THEIR savers is used for.