Pay Off Loan VS Top Up

DutchJohnson81

Hi everyone.

I have a personal loan with Nationwide. I'm currently in Afghanistan serving. The loan was for my car which I have just sold. By the time I return, the amount I received for my car will cover the settlement of my loan balance. A couple of things I need some advice for:

I want to purchase a new car (pre-owned). Is it better to pay off the existing loan and apply for a new loan to assist with purchasing costs for a replacement car, OR, apply for a top up on the existing loan and use the hard cash I have as well?

Within the next 12 months I want to persue a mortgage. My Experian Credit Rating is fair and by the time I return, the personal loan for my old car will be the only credit/debt I have.

Thanks a lot for taking the time to read this and I look forward to any help you guys can offer.

Kind regards.

worried48

If others' experiences are anything to go by, with only "fair" credit rating you are not likely to get a loan at all. Sorry

DutchJohnson81

My bad, should have said...

My Father would be guarantor on it as per my current loan agreement (with no dramas at all).

worried48

What APR are you getting?

iaintw

DutchJohnson81
your credit reference will be bad when you apply for a loan (a search on your credit report) then don't do it my advice not too.
1. your credit reference report will be fair to poor when you do apply for a loan. most lenders will asking questions that you are "high risk"
2. dont shop for lenders that you got paid from the army and SAVE UP.
3. your credit report will fixed itself.
4. get a pre paid credit card their is one company can help you to paid your debts £5,000 (pockit) Pockit offer you a £5k credit limit

pheonixrising21

worried48 wrote: »

If others' experiences are anything to go by, with only "fair" credit rating you are not likely to get a loan at all. Sorry

Who says? Experian don't lend money, so their rating means exactly nothing. You have no idea how actual lenders view a credit report, no-one does but the lenders. Some people with "fair" ratings get loans, while some with "excellent" ratings don't. Experian often give "excellent" ratings to people who have never had credit before. Such people often struggle to actually get credit

OP, what is your salary and how much is outstanding on the loan and other debts? If its more than about 50% of your salary, then you will struggle to get any further loan. is there anything bad on your credit report such as CCjs, missed/late payments?

DutchJohnson81

My APR was quite high when I took out the loan. About 13%. As Id missed a few payments on my old Argos card and subsequently it was defaulted. Paid off now. Only things I have are my phone bill (paid over 10months now which Experian say is a good thing?) and my personal loan. There is only £4900 left to pay on the loan from Spring 2013 when I return. I currently have the cash to settle that. I certainly don't have debt anywhere near 50% of my salary. So, Phoenix...what is your opinion? Pay off and start again or apply for top up? Obvious good of paying off is that it shows good money management. Downside is, bank loses interest. It's a flexiloan btw. I also pay my car insurance in one lump sum.

Thanks for the feedback and help on this.

DutchJohnson81

Anyone?

Cheers.

thriftymomma

If your old loan is a couple of years old, then chances are, you will get a better rate by applying for a brand new loan, as opposed to topping up your old loan at the old rates. Check the apr of your current loan and compare to current lending rates. Good luck.

debtcutter

Agree with thrifty.

If you're still at same address you were, have made all payments on time, haven't been applying for lots of credit and have generally showed that you're responsible (and your credit file reflects this) getting a new loan might offer a lower rate.

DutchJohnson81

Thanks guys. Nationwide did try to get me in once to top up. They did say, however, that it would reflect new APR rates and my monthly payments could go down. So, effectively, getting a new loan on the old foundation so to speak. Their rates are quite low but as we all know, they're reserved for the squeaky clean customers. So no way I'd be getting 6.3% APR. Haha. I'm still undecided. Pros and cons both ways. Some people say longevity is better at repairing a credit score.