Loan Advice

bartonyoung79

Hello there,

I am currently in the market for a loan, but before going off and risking a no which will go on my credit report I wanted advice.

I am looking for a loan of £5000, this is to pay off a large chunk of my credit card which has a balance of £6900 and a limit of £7000. Although 'debt consolidation' is not ideal it is the only way to reduce the cost.

I have the one credit card with the balance and limit as above and I am just about to go into the final year and a bit of a 5 year loan £5000 Halifax loan.

So my outstanding credit it is £9500ish. For what it's worth I have checked my Experian score/report. The score is 976, but I am not sure what worth to put into that. I have never defaulted or missed a payment, I have lived at the same address for 2 years and I have been on the electoral register for about 1 year.

I earn around £2000 after tax and my rent and bill payments combined are £825/month.

Is it worth me asking for a loan?
If so who are best?
Am I credit risk for lenders, in this current climate, regardless of my record?

Any advice would be appreciated.

Thanks.

Tixy

You have a chance of being accepted I'd say.
Do you have an overdraft at all? if so do you use it regularly?
Have you been paying just the minimum payment to your card debt or do you pay more than the minimum?

Presumably your salary is around £32k, so adding up your existing credit and the new loan you want you'll still a little under half your annual income.
So hopefully you shouldn't be rejected on afforability and if your credit history is very good with no missed payments then you should stand a reasonable chance, although maybe not at the lowest rates.

What is the APR on the credit card?

Usually people recommend trying your own bank first. Who do you bank with? is the credit card with the same bank?

Dowsett

Well I'd say no. I made a thread earlier thinking I had a pretty good chance at one but got turned down.

If it's just to pay ur credit card off then just do what I've done.

Work out how much u can afford to pay off it each month and set up that amount on a direct debit and just dont use ur card. This is what I've done and I am starting to see results.

I know a loan is a quick way but would u really want to be paying x amount each month for x amount of years when u can just setup a direct debit?

That in it's self is similar to a loan amount. There's no rush if ur paying it back and maybe at a lower rate

bartonyoung79

Thanks for you quick responses.

The card has an APR of 13.5% and is with Cahoot. I do often put in more then the minimum with good intentions then just take it all out again. That's why I would like the loan it stops me accessing the credit and it just goes down like with my other loan. I tend not to miss what I haven't got, but my pathetic will power is such that if I can access it I will.

I bank with HSBC and live within my overdraft a the end of each month which is £1750.

Tixy

Okay - well being in your overdraft each month doesn't look great to lenders - many of them take a view that this means you cannot control your money.

With the card debt only being 13.5% then you might struggle to get a loan cheaper than this.
Add your overdraft to your existing credit and the new loan and you are going to be getting up to 50% of your income, and it is much much harder to get new credit that will be taking you to that sort of limit.

The loan won't actually stop you accessing credit as you aren't even planning on closing the credit card (as it will still have nearly £2k left on the balance). In fact its more likely that you'd end up spending more on the card as you'll have much more credit left on it. Thats a classic problem with debt consolidation that people end up in more debt not less or even the same amount. For people who have poor willpower/money management then I would say a consolidation is a really bad idea.

Rather than go for a loan you need to take better control of your money. Work out a monthly budget and how much you can afford to repay against your debts each month. Then set up a higher monthly DD or a standing order as well as the minimum payment DD for your credit card. Cut up the card so you cannot spend on it anymore.

If cahoot ever try to increase your APR make sure you opt out the increase within 60days.

Have a look at the snowball calculator and put all your debts in there and see how quickly you can be debt free, and the best order to tackle your debts to minimise interest - http://www.whatsthecost.com/snowball.aspx

bartonyoung79

Thanks Tixy.

I guess what I failed to state was that I will be closing the credit card as I plan to use some inheritance pay off the remainder. In terms of the overdraft I do live in it but not too its maximum extent.

I do take your point about debt consolidation not being the answer, so maybe budgeting is the better route. I guess I would feel comfortable with a structured payment without any access to the card.

Dowsett

Might be worth checking current 'long term' card deals an doing a balance transfer. Not sure when u got ur card but I got my barclay card in2009 and that's got a rate of 6.7%!! I do use it but only on things I can get cash back on (BC freedom) like shell petrol so I understand it's hard to pay off. Just setup ur direct debit an just use ut for emergencies - that's what it's there for IMO.

As for the OD. I used to live in my 1k OD when I was younger. I found it even harder to get out of. But this is the same as any other saving. Try an cut back on things - this may make u want to spend more so here's what I was planning on doing before I got a lump sum to pay it off.

Open a normal no frills bank account or ISA and pay into it monthly however much u can. Once u have 1750, transfer it to ur OD account and then discipline urself.

This way u can see at least 1 account inter black at all times which will give u more determination to save an pay off overdrafts an credit cards abit easier.

Hope this helps.

bartonyoung79

Both been very helpful, thanks very much.

YorkshireBoy

Two major things are working against you here, in terms of what any credit search will uncover:

1. You're using 98.6% of the available credit on the Cahoot card...and have been for some time?

2. You can't even manage your day-to-day/month-to-month finances because you're regularly using your overdraft.

When coupled with the £5K loan, even though you've only around £1K outstanding, this shows you've been treating credit with gay abandon!

You can't even expect your bank to help with a decent rate loan because they're aware of point 2 above (and are probably making a very good return on the overdraft facility already).

I'm with the earlier poster...I don't think, even if accepted anywhere for a loan, you'll better the 13.5% APR on the Cahoot card...despite a reasonable salary.

What you do need to do though, moving forwards, is keep an eye on all correspondence from Cahoot, because if they rate-jack you (and there's a good chance they will at some point with a constant 98.6% utilisation) you need to be on the ball so you can exercise your right to opt out of any rate increase. And that'll stop you spending on the card...if your lack of willpower won't!

bartonyoung79

I think you're absolutely correct YorkshireBoy, a strict budget regime is the only real answer.

Wobblydeb

If you can bring yourself to do it, cut up the card!

If not (or you genuinely need it for emergencies) then put it into a small dish of water and put it in the freezer. The time it takes to defrost it, should ensure you use it for planned purchases only, and takes the temptation away from frivolous spending.