Will I get a loan?

jibwauly

Just wondering if anyone else has been in a similar situation. I recently received my credit score from experian. It came in at 825 (fair but I guess bordering on good?).

Im looking to get a loan for about £7500 to pay off some credit cards and reduce my credit utilization and therefore improve my score.

I used the experian loan search - it matched some reasonable loans through high street lenders. The next day I had a look it only showed secured loans options for me with crazy APRs.

Has anyone used this facility before through the experian website. Just wondering how truthful it actually is?

Tixy

Generally considered to be pretty useless. Experian only have access to a small amount of information a potential lender will consider when looking at your application.

ChopperST

I'd brace yourself for the usual barrage of messages advising against what you are about to do. You are borrowing money to pay off borrowed money. Its not going to end well.

debtcutter

Sorry Tixy, just to clarify (as was talking to a friend the other day who was confused when I said what you have just said)

Lenders get their credit file info from the credit reference agencies, so Experian can see on your credit file exactly what every lender that does a credit search can see on your credit file. It's just that's all Experian can see.

Lenders ask you for a lot more info (exact income, outgoings, money towards utility bills/rent, dependent children, lodgers/people paying you rent) than Experian hold on you, so lenders will have the info that experian have (which they can use however they like, without experian understanding how they use it) + a load more info.

A credit reference agency will never accurately work out who will lend to you and who won't.

debtcutter

ChopperST wrote: »

I'd brace yourself for the usual barrage of messages advising against what you are about to do. You are borrowing money to pay off borrowed money. Its not going to end well.

Totally disagree.

Borrowing money to pay off debt is an excellent idea, provided that the new credit being taken out is:

- affordable
- a lower interest rate than the existing debt (or has an intro rate cheaper than you're currently paying and you're confident you will pay on time, so your rating doesn't get worse)
- doesn't charge a fee for trasferring the debt that wipes out the lower rate (e.g a 4% balance transfer fee and the APR is only 1% lower, might not be worth it)

As long as the new loan/card/Overdraft saves you money and doesn't cause you to miss payments because you can't afford it, it's the right thing to do IMO.

ChopperST

debtcutter wrote: »

Totally disagree.

Borrowing money to pay off debt is an excellent idea, provided that the new credit being taken out is:

- affordable
- a lower interest rate than the existing debt (or has an intro rate cheaper than you're currently paying and you're confident you will pay on time, so your rating doesn't get worse)
- doesn't charge a fee for trasferring the debt that wipes out the lower rate (e.g a 4% balance transfer fee and the APR is only 1% lower, might not be worth it)

As long as the new loan/card/Overdraft saves you money and doesn't cause you to miss payments because you can't afford it, it's the right thing to do IMO.

Totally agree, however not everybody is a disciplined as you or I. I think there is a genuine gap in the market for such a loan where you are compelled to pay of your existing debt by the new lender. Sadly the risk is the OP gets a new loan and spends it on something else and worsens their debt burden.

27col

How does a loan reduce your credit utilisation. If you have a loan then you still have credit. Just borrowed from a different lender.

gb12345

ChopperST wrote: »

Sadly the risk is the OP gets a new loan and spends it on something else and worsens their debt burden.

Or pays off the card(s) and then a few months down the line sees something nice and new and shiney and maxes them out - resulting in the same increased debt burden.

debtcutter

ChopperST wrote: »

Totally agree, however not everybody is a disciplined as you or I. I think there is a genuine gap in the market for such a loan where you are compelled to pay of your existing debt by the new lender. Sadly the risk is the OP gets a new loan and spends it on something else and worsens their debt burden.

Sorry? So you agree that for you, my advice is good advice, but not for "them lot" asking questions on the forum. "They" aren't sensible so will spend it all?

I totally, completely, 100% think that's a ridiculous outlook to have. Tell people the facts, let them choose what to do.

Whether or not someone is as disciplined as you (or I) is irrelevant. There's a best thing to do and then there are other things to do. Sitting with debt that cost more than you need to be paying is never going to be the best thing to do, whether or not they're as intellectually gifted as you are.

Also, with most credit cards, if you put down "balance transfer" as your main reason, they'll ask for the account number for the other card and the outstanding balance and will then complete that for you when you take out the card. (not all, but some card providers). Not sure if any of them insist that they do it for you, though.

debtcutter

27col wrote: »

How does a loan reduce your credit utilisation. If you have a loan then you still have credit. Just borrowed from a different lender.

If you owe £10K to credit cards and have maxed out, but no nothing else, you currently have a credit utilisation % of 100%.

If you borrow £10K on a loan, then pay off the credit card, you now have a utilisation % of 50%. As you owe £10K and have an extra, un-utilised £10K available.

pheonixrising21

ChopperST wrote: »

Totally agree, however not everybody is a disciplined as you or I. I think there is a genuine gap in the market for such a loan where you are compelled to pay of your existing debt by the new lender. Sadly the risk is the OP gets a new loan and spends it on something else and worsens their debt burden.

I've been suggesting something like this for ages on these forums, only to be [borderline] abused.

I've suggested that consolidation loans should work like car finance, where the dealer pays off your old finance for you as part of the trade in on your old car.

If a new lender were to never actually give you the cash, but instead use it to pay off all your outstanding debts and close said accounts on your behalf.

I've been told it can't be done as lenders are not allowed to close accounts on your behalf. Yet the motor trade manage it perfectly well, unless every motor dealer and the finance companies they use are breaking the law?

I've been told that it can't be done unless some almighty Government agency looks after the whole thing and constantly checks your debts to make sure you have the lowest rates. I, again, pointed to the motor industry which manages perfectly well without an over-riding government agency telling us that its time to change car. If you want a new car, you do all the research into what car you want yourself, go and negotiate the deal yourself, etc, etc.

I've been told it can't be done because the banks don't have that level of communication. Again, the motor trade manage it, and also the banks manage well enough to talk to each other when you use their current account switching service.

The main reason why banks don't do this is pure profit. If everyone had the ability to easily consolidate their £10k CC debts at (say) 18% into a loan at say 9%, the banks, as a whole, would lose out on a shedload of interest.

Instead, they use affordability as the reason to decline you. "You have £10k debt with other lenders at a high rate? You want £10k to pay it off and pay us back at a lower rate? Sorry, thats £20k total debt, you can't afford that, no loan for you!"

Like you say, there is a genuine gap in the market for this and the first bank to offer this service will gain a load of customers. The rest will lose money, so no one will do it.

No one here has yet come back with a valid reason why this wouldn't work, apart from the banks collective loss of profit.

Anyway, rant over