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OH offered loan bigger than annual income - Future ability to gain credit?

kimminess
kimminess Posts: 77 Forumite
edited 9 June 2012 at 3:06PM in Loans
Hi all,

My OH has been offered a 'top-up' loan from a bank beginning with B.. They have pre-selected him to receive up to 15k. He is looking for a car to buy at the moment so will be looking to take out some sort of loan but not 15k..!

My question is, his annual take home wages are just short of £15,000. I know potential creditors don't like you to have obligations over 50% of your income, so would this render him completely unable to gain credit for the term of the loan if (for arguments sake) he took the 15k?

I almost couldn't believe it when he said how much they were willing to lend him.. I know this is due to his being a longstanding customer who has not missed a payment on his existing loan but I can't help feeling it's a little irresponsible on the bank's part!

Any input appreciated :)
:) LBM October 2011 :)

Comments

  • shop-to-drop
    shop-to-drop Posts: 4,340 Forumite
    He would still have to apply for the loan. He wouldn't be preappoved a £15k loan.
    :j Trytryagain FLYLADY - SAYE £700 each month Premium Bonds £713 Mortgage Was £100,000@20/6/08 now zilch 21/4/15:beer: WTL - 52 (I'll do it 4 MUM)
  • kimminess
    kimminess Posts: 77 Forumite
    Thats how it showed up on his banking, we went in branch yesterday and the customer service assisstant took us into a room and asked him how much he was after as he could have up to £15,000 at 23.4%, but only on a term over 5 years..

    It did seem a little too good to be true, seemed as if the money was right there if he wanted it all he had to do was sign the dotted line type thing..!
    :) LBM October 2011 :)
  • mcjordi
    mcjordi Posts: 4,238 Forumite
    Part of the Furniture Combo Breaker
    23.3% eek..

    have you tried convential car finance?
    Sealed pot challenger # 10
    1v100 £15/300
  • jason1231972
    jason1231972 Posts: 350 Forumite
    kimminess wrote: »
    Thats how it showed up on his banking, we went in branch yesterday and the customer service assisstant took us into a room and asked him how much he was after as he could have up to £15,000 at 23.4%, but only on a term over 5 years..

    It did seem a little too good to be true, seemed as if the money was right there if he wanted it all he had to do was sign the dotted line type thing..!

    Be wary of 'pre approved' offers, as they exist to merely target customers who might be eligible for certain products. It's a lazy sales tactic...market products in bulk via internet banking, etc., dangle the carrot, and let the consumers come!

    Unless he's actually and fully applied (credit check and all), the loan isn't his - not yet, and potentially not ever.

    However, to answer your specific question in your OP, if hubby took on a loan that equates to 100%+ of his salary, he very probably will struggle to get other mainstream credit for its duration.

    If he doesn't 'need' 15k, advise him not to take it (that's if he's approved!)
  • kimminess
    kimminess Posts: 77 Forumite
    mcjordi - He'll be looking at that too before he does anything, as long as it's not the type of finance where there is a big final payment I think he may go down that route :) The APR on the loan is so high I think because he is 21.

    jason - Aha! Thank you for that input, that hits the nail on the head. I dont think he wants to take anywhere near the 15k but as you say, dangle the carrot and sometimes people change their mind..

    The main reason I asked is because if (fingers crossed) a few years down the line we decide we want to get a mortgage together I didn't want this dangling over his head as the loan wouldn't be paid off till he is 27!

    Thanks guys :)
    :) LBM October 2011 :)
  • Derivative
    Derivative Posts: 1,698 Forumite
    Theory aside, I'm not quite sure why this is relevant?

    If he's looking to buy a cheap-ish car and can get a £15k loan - why does it matter that he will be unable to gain credit until the loan is paid in full?

    He'll have £10k+ lying around, what (other than perhaps a mortgage) is he likely to need any more than that for?

    edit: saw the above post, a mortgage. ;) Ignore me then.
    Said Aristippus, “If you would learn to be subservient to the king you would not have to live on lentils.”
    Said Diogenes, “Learn to live on lentils and you will not have to be subservient to the king.”[FONT=Verdana, Arial, Helvetica][/FONT]
  • kimminess
    kimminess Posts: 77 Forumite
    Derivative wrote: »

    edit: saw the above post, a mortgage. ;) Ignore me then.

    Just thinking of the future, can't be too prepared after all! :D
    :) LBM October 2011 :)
  • jason1231972
    jason1231972 Posts: 350 Forumite
    kimminess wrote: »
    mcjordi - He'll be looking at that too before he does anything, as long as it's not the type of finance where there is a big final payment I think he may go down that route :) The APR on the loan is so high I think because he is 21.

    jason - Aha! Thank you for that input, that hits the nail on the head. I dont think he wants to take anywhere near the 15k but as you say, dangle the carrot and sometimes people change their mind..

    The main reason I asked is because if (fingers crossed) a few years down the line we decide we want to get a mortgage together I didn't want this dangling over his head as the loan wouldn't be paid off till he is 27!

    Thanks guys :)

    By the time he's 27, or anything close, the level of debt hanging over his head will be reduced substantially, assuming he pays OK! This would minimise to some degree problems getting a mortgage, etc., but still a bad idea to borrow more than required to meet his needs, because there'll still be quite a burden on his affordability, which is calculated for mortgage purposes.

    £15k over 5 years @ 23.4% APR would cost a staggering £426 per month to repay, with over £10k charged in interest. Woah. Then again, if he pays it all off and can prove it, he'd probably qualify for a mortgage no problem!

    Seriously, though, don't let him touch that loan (the APR alone is pretty scandalous).
  • kimminess
    kimminess Posts: 77 Forumite
    £10k charged in interest.. That actually makes me feel a bit sick :eek:

    I will have to put my foot down then ;) Or at least make a well reasoned arguement against it!

    Going to have a look at the Ts and Cs now so I know 100% what I'm talking about :) Thanks for all your help!
    :) LBM October 2011 :)
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