Reason for loan - how does this affect decision?

zippy1977

Was just wondering why banks ask what the loan is for and how this would affect their decision on whether to grant it or not?

Does it affect the length of time you can borrow over and interest rate?

Thanks

forgotmyname

The interest rate will be based on your credit risk rather than the item.

If you want to borrow £20k to take all your mates on holiday then i would expect to be rejected.

Whatever the reason you must be honest.

poppasmurf_bewdley

Lots of reasons why lenders want to know what you want the money for:

a) To make the deposit for a mortgage
b) To set up a business when applying for a personal loan
c) To buy something illegal

are just three examples of reasons why the lenders would want to know and would probably be rejected.

A consolidation loan also usually attracts a higher loan rate, so they would want to know if this was the reason you wanted the money.

And would you lend £5k to someone who wanted the money to emigrate to Australia or move to Peru?

dealer_wins

The reason did affect Lloyds loans when I was working for them (ended 2003)

A holiday loan would be rejected if it was over more than 24 months, a wedding loan over more 36 months.

Certain reasons also generated a "refer" code which would require a meeting with a staff member and a full income/expenditure review.

Lloyds was actually prudent, not only with personal credit, but mortgages as well!! they just made one bad decision (HBOS) during the credit crunch which cost its shareholders billions LOL

a4a

Interesting thread.

So does anyone know the best 'reasons' for borrowing as far as lenders are concerned?

CKhalvashi

a4a wrote: »

Interesting thread.

So does anyone know the best 'reasons' for borrowing as far as lenders are concerned?

The reason that you want the money for

Anything else is application fraud.

CK

Atrube

CKhalvashi wrote: »

The reason that you want the money for

Anything else is application fraud.

CK

But what reasons do lenders consider the best and worst as far as accepting/declining or raising/lowering interest rates?

CKhalvashi

Atrube wrote: »

But what reasons do lenders consider the best and worst as far as accepting/declining or raising/lowering interest rates?

I don't know, and it will be commercially sensitive information.

a4a

CKhalvashi wrote: »

The reason that you want the money for

Anything else is application fraud.

CK

Was wondering from lenders point of view, not borrowers.

Morglin

a4a wrote: »

Interesting thread.

So does anyone know the best 'reasons' for borrowing as far as lenders are concerned?

Not sure if it's still the case, but the all embracing 'home improvements' used to be seen as a 'good reason' to borrow.

I would have thought, nowadays, that affordability is the most important consideration though.

Lin

dealer_wins

With Lloyds the reason for the loan affected the maximum term allowed, but not the interest rate or acceptability of the loan.