Credit Union Loan

vase

Hi all.

I had £30k of debt that I organised arrangements on about 6 years ago, they're now at about £18k. So, they're still "active" but they don't show on my credit file.

My Experian file shows three credit cards (small balances and limits) green all the way, phone contracts green, and never a missed mortgage payment. It also shows an old default, from August 2014 so due to come off this August.

My Equifax file is as above, with the exceptions of two APs, one finished and settled in 2011, the other finished (transferred to other creditor) at the same time.

I was thinking of perhaps applying for a loan with my credit union in order to clear the debts. What do you think my chances would be?

Thank you.

Thank you.

[Deleted User]

Most credit unions don't credit check you. They will expect you to be a regular saver and mine, for example, will lend you about 4 times your savings. They will probably review your finances more carefully than a bank though (i.e. go through your bank statements etc).

Tixy

Most credit unions offer fairly small loans. For many credit unions the first loans you take out are limited to around £750 or £1000.

Are your current creditors still charging you interest or have most frozen interest?
If they are still charging interest then perhaps see if you can get a mainstream loan after August.

JKSandy

"Most credit unions don't credit check you"

I actually don't think that is 100% correct , I think most if not all do credit checks before giving out loans.

Tixy

JKSandy wrote: »

"Most credit unions don't credit check you"

I actually don't think that is 100% correct , I think most if not all do credit checks before giving out loans.

Many do perform a credit search. However they focus more on your ability to repay than what is on your credit file. They will lend to people who wouldn't be accepted for traditional mainstream credit.
Credit Unions loans usually aren't particularly cheap compared to mainstream credit, but are obviously much cheaper than subprime credit/payday loans etc.

vase

Hi all, thank you for your posts.

My credit union offers loans for up to £15000 at 5.9%, which seems good to me! I can easily afford to pay £500 back per month, which wouldn't take too long to pay back - 33 months with £1244 total interest.

I am going to try to get a mortgage soon, the idea was to clear debts so that process might be easier but it could make it more complicated perhaps!?

It's a minefield!

Tixy

How much are you paying to your current debts a month? and are they still charging interest?

I wouldn't expect it to make much of a difference to your mortgage application. Especially if you already have a mortgage and haven't missed payments on it.
The debts need to be declared on your mortgage application either way (even if they no longer show on file you still need to declare them).

vase

The interest has been frozen and I'm paying about £200 per month. I know that the ideal scenario would be to pay the £500 into the old debts (I know that I owe it), but it will take what seems like a lifetime to pay off. With a loan, they would potentially accept a lower settlement.

Tixy

If the interest on the loan is less than the discount you might get on offering a reduced full & final settlement then that could be worth while in that respect.

Paying off £500 a month to your current debts would take you 36months to repay. Your loan example is 33 months so yes it would be slightly quicker if you needed to borrow £15k to settle the debts and were accepted.

That said if could impact on a potential new mortgage. If you take out a new loan with an agreed repayment of £500 then it is that £500 a month that will be factored in to affordability calculations, not the £200 you currently pay towards the debts.

vase

Thank you.

Will a mortgage broker be tied in being able to offer me 'further debt' if I already have some that I'm paying off without interest? Will their hands be tied until they are paid perhaps?

Tixy

I assume a lender would just assess your affordability the same regardless of whether some of your debt is interest free or not.

Might be worth speaking to an independant mortgage broker for some advice. Or you could try posting on the mortgages section of the forum where there are a number of brokers who post.