Is it easy to refinance a loan to get a lower interest rate

sh856531

Hi all

I have a loan that was for 13000 over 5 years.

Although I have quite a high income and a good credit history, because I needed the money quickly I didn't shop around. This means I accepted an interest rate of something like 12 percent.

A friend of mine who actually has considerably lower income is has a loan for a similar amount at 7.9 percent.

I would like to refinance the loan at that lower rate. Can anyone tell me if this is possible?

Is there anyway to go about doing it so that the bank knows I want to simply move an existing loan rather than take on more debt?

Many thanks in advance

S

CHR15

It is possible but consider the simple fact that when you applied for the last loan, you were a much better looking applicant than you are now (because you didn't already have a £13k loan hanging over you).

If your total Unsecured available credit is less than 50% of your Salary, you stand a fairly good chance.
to work this out you must add your new loan (£13k?) to your existing debt along with all the available credit limits on credit cards etc (not the current balance).

If we just look at the loans, 2x£13k is £26k so already you need a Salary of over £52k to be considered for a good rate.
Now add up the credit limits on cards which will push this figure even higher.

Where there is an overlap, expect your offered APR to increase, up to a level where they decline you.

A lender can never be certain you will use a new loan to consolidate so they will consider it an addition to your current borrowing.

sh856531

CHR15 wrote: »

It is possible but consider the simple fact that when you applied for the last loan, you were a much better looking applicant than you are now (because you didn't already have a £13k loan hanging over you).

If your total Unsecured available credit is less than 50% of your Salary, you stand a fairly good chance.
to work this out you must add your new loan (£13k?) to your existing debt along with all the available credit limits on credit cards etc (not the current balance).

If we just look at the loans, 2x£13k is £26k so already you need a Salary of over £52k to be considered for a good rate.
Now add up the credit limits on cards which will push this figure even higher.

Where there is an overlap, expect your offered APR to increase, up to a level where they decline you.

A lender can never be certain you will use a new loan to consolidate so they will consider it an addition to your current borrowing.

Hi there

Yes thats what I was worried about. I was wondering if there was a mechanism in place where banks can get round this. You hear about refinancing or consolidation loans all the time so I wondered if there was a mechanism whereby the bank can be sure you use the money for the agreed purpose.

I would go as far as to allow them just to give the money direct to the other loan provider - almost in a similar way to the way ISAs are transferred.

I wasn't sure if there was any way of doing this however

Many thanks

S

paddyrg

Alas it is not in the interests of the banks to have a way round refinancing you at a lower rate. I think your options will be very limited no matter what you try!

sh856531

paddyrg wrote: »

Alas it is not in the interests of the banks to have a way round refinancing you at a lower rate. I think your options will be very limited no matter what you try!

OK - I think I'll try with smile as they are my bank and can see I'm pretty trust worthy I think. I've been with them for 12 years so you never know!

Thanks
S

suitable69

i did a similar thing with Nationwide who I bank with and borrowed more money and got a lower rate and only added a year to the old loan, is this what your after or am still half asleep (sorry if thats the case)

dantheman2010

I owed Tesco £16,500 still on my loan (with 4 years still to go), but they had an early settlement figure of approx £13,000
I applied for a Nationwide loan for £13,000 (over 3 years) and got accepted for this at a 9% APR so lower than the approx 11% APR with Tesco. I only earn £26000 before tax and I was accepted and the two together (£16k + £13k) are more than what I earn. Obviously I have now cleared the Tesco one in full, but Nationwide had no guarantee I would.

It does cost me a little bit more per month but I finish my loan a year earlier so benefit in long term by having what would have been my 4th and final year with no payments.

So give it a whirl.