Employment status has changed...need a loan.

couttsno1

Hi,
I've recently become a sole trader and this seems to have thrown me into a void when it comes to trying to get a personal loan to consolidate my personal debt. I have an excellent credit rating and also excellent rating with my bank...yet as soon as I declare being a sole trader APR on a loan goes from about 7% to 16%!
Has anyone else been in this position and are there any companies who don't crucify you just for changing employment status?
I was also wondering whether a solution would be to get a loan with my sister? Is that possible?

Many thanks for any help,
Sarah

Tixy

Hi

Even just changing from one employer to another can have a detrimental effect on a person's ability to get credit (or the rate they can get) for a period of time.

And starting a new business venture as a self-employed person would certainly be likely to increase the bank's perceived risk - to them you would now be much more likely to lose your income or have a reduction in income and much more likely to default on a loan - and will currently be unable to verify your level of income.

Are you certain you are not just comparing the overall representative APR of 7% with a rate personal to you (the 16%)? How do you know you could get 7% if you were employed?

You could look at getting a joint loan with your sister (or anyone) if they are prepared to do so. Things to consider are that you will become financially linked on your credit files - anything negative on one's file will affect the others. You'll both be legally responsible for the repayment of the debt - if your business goes under and you cannot pay she will have to make payments or her credit rating will be damaged and she could be taken to court for the debt as well as you.
Whether you'd actually be offered a better rate for a joint loan than yourself alone would be very hard to judge - even if we knew the full personal finances of both of you.

You mention you are looking at consolidating personal debt - are the APRs on your existing debts more or less than the 16%.

couttsno1

Hey,
Well it's the same job i've been doing for 3 years with the same income but have had to become Ltd. Even though i'm a sole trader I have a guaranteed regular income.

Well I currently have a loan with my bank, which is like 7.4%...so I wanted to renew it and throw my CC debt on top. When we went through the application it jumped to 16%. Do you think it's possible that the 16% would be there anyway, employed or self-employed? My bank even said it was a vast difference being quoted 7% to then get an offer at 16%. My CC is 0% for about another 6 months so jumping to a loan with 16% actually adds a further 4k interest onto my debt....which makes no sense.
What I don't want to do is apply for other loans and have it on my credit score history so feel a little stuck.

Tixy

I'd think its possible you would have ended up with a higher rate (even if not as high as 16%).

Extending / increasing a loan at the moment seems to be considered higher risk by a lot of lenders - there are quite a lot of people reporting that they have been told by a existing lender that they cannot borrow any more (refinance or a seperate new loan) until the outstanding debt has been repaid.

If those are your only 2 debts then it would seem to make more sense to stick with your existing loan and card and then in 5months see if you can get a 0% balance transfer card or low life of balance card to transfer any balance still remaining on your credit card.