Declined on 'Affordability'. What now? Advice?

Seobaina

Hi

I bank with Natwest and wanted to take out a debt consolidation loan to clear my credit cards. I have about 8800 total over 4 cards which means I pay out about £209 a month in interest. As my basic pay comes in around £500 a month (I work overtime when I am offered it) I am only paying the minimum payments (or within a few pounds of them). I can't afford to pay much more because my earnings are low but my only other regular expenses are my car insurance (£45ish) and mobile bill (£25ish).

I wanted to borrow 10,000 so that I could pay off all of my cards and get rid of them but still have £1000 for emergencies, etc. The monthly payments on this with NatWest at the rate I was offered (12.9%) would have been £224 a month. Not much more than I pay now per month but meant £3400 interest over the 5 years as apposed to the £2500 I'm paying yearly.

I'm not surprised they turned me down on 'affordability' because if I had that plus my cards then yes I would struggle but I'm trying to get rid of my cards and I said that right from the start. I'd happily even cut them up in front of them. I'm just trying to sort out my finances and improve this.

Where do I go from here? Any advice would be welcomed.

Thanks

Bantex_2

You are not going to get a £10,000 loan with an income of £6000 pa.

Seobaina

I earn over 6000 a year because of overtime. Not hugely over but between 6-8. The advisor at Natwest called me and asked me about getting a loan. She was genuinely surprised, or appeared to be, when it was declined. And if I'm not gonna get a loan, do you have any advice on how I can improve things? I don't want to apply for a credit card to transfer balance if I'm likely to be turned down cause I am trying not to worsen my credit rating.

lynz68

No Bank is going to let you borrow more than you earn. On average the most you will be allowed is 50% of your income but this includes any debts you already have?

They cannot guarantee you will not run up the debt on the cards again. Even if you were to cut them up in front of them there is nothing to stop you applying for a replacement.


Overtime cannot be counted as income as it's not guaranteed and if they were to ask your employer they will only confirm your basic income.

You possibly need to look at increasing your hours permanently or getting a second job. If this is not a possibility and you can't cope speak to one of the debt charities.

Pixie5740

As a rule of thumb lenders will go to 50% of your income minus any existing credit that you have even though you say you want to use the loan for consolidation (the bit about borrowing £1,000 to have for emergencies seems daft to me).

So you have existing debt of £9,000 and want to borrow an additional £10,000 on an income of between £6,000 to £8,000 a year. It's not going to happen.

Perhaps it's worth speaking with one of the debt charities such as Step Change.

You have car insurance so I assume you have a car? Could you sell this and put the money towards clearing your debts and use public transport or cycle instead?

Mobile phone contact of £25 could be reduced either by negociating a better deal (I pay £15 for 2000 mins, unlimited texts and unlimited data) or changing to PAYG with Giff Gaff?

Seobaina

lynz68 wrote: »

You possibly need to look at increasing your hours permanently or getting a second job. If this is not a possibility and you can't cope speak to one of the debt charities.

Ok, thanks. I already have a second job because I work freelance in filming but the recession has hit that badly and I can't rely on it for regular pay. I work all the overtime I can, which sometimes means a full 40 hour week but my contract is 12 and they won't increase it.

Should I look at trying to balance transfer credit cards so I'm at least paying off a bit each month rather than just the interest?

Seobaina

Pixie5740 wrote: »

As a rule of thumb lenders will go to 50% of your income minus any existing credit that you have even though you say you want to use the loan for consolidation (the bit about borrowing £1,000 to have for emergencies seems daft to me).

Perhaps it's worth speaking with one of the debt charities such as Step Change.

You have car insurance so I assume you have a car? Could you sell this and put the money towards clearing your debts and use public transport or cycle instead?

Mobile phone contact of £25 could be reduced either by negociating a better deal (I pay £15 for 2000 mins, unlimited texts and unlimited data) or changing to PAYG with Giff Gaff?

I don't see why it's daft. It was only an extra £200 in interest over the 5 years to get 10,000 instead of 9,000 and I wanted to ensure I had something spare in case I had an emergency car or dental or other bill. I didn't want to fall into the trap of 'sticking it on my card'.

I can't sell my car as there is no public transport out here and it would take me far too long to cycle to work. I also need a car for my freelance work.

My mobile I'm signed into a contract for 2 years so that's a no go unfortunately too.

I appreciate the feedback guys, thanks. I think I'd just got my hopes up about clearing some debt or at least improving it because the bank had seemed so certain. I'll try citizens advice or one of the charities like Step Change like the previous poster suggested

Phil_Linder

Seobaina wrote: »

Ok, thanks. I already have a second job because I work freelance in filming but the recession has hit that badly and I can't rely on it for regular pay. I work all the overtime I can, which sometimes means a full 40 hour week but my contract is 12 and they won't increase it.

Should I look at trying to balance transfer credit cards so I'm at least paying off a bit each month rather than just the interest?

You could try and get another credit card with 0% on balance transfers for 12-18 months. If you got one you could max that, pay the minimum each month, and then the extra mony you save in not paying interest you should pay off the other cards which still have interest. Evetually you should close that one down 1 card at a time. When the interest free period ends you should try and get another card with same offer and do it again.

It might not be that easy to get one but you should try. Make sure when you clear one of the existing cards you close that down straight away with the lending company.

Oh and don't spend another penny on the cards...

Good luck

Seobaina

Phil_Linder wrote: »

You could try and get another credit card with 0% on balance transfers for 12-18 months. If you got one you could max that, pay the minimum each month, and then the extra mony you save in not paying interest you should pay off the other cards which still have interest. Evetually you should close that one down 1 card at a time. When the interest free period ends you should try and get another card with same offer and do it again.

It might not be that easy to get one but you should try. Make sure when you clear one of the existing cards you close that down straight away with the lending company.

Oh and don't spend another penny on the cards...

Good luck

Thank you

BillJones

Seobaina wrote: »

Where do I go from here? Any advice would be welcomed.

Thanks

The only sensible route forwards is for you to sort out a statement of affairs, post it on here, and have people help you to spot where you can make savings.

Taking out a loan that is not just as big as all your current debts, but which includes a bit extra "just in case" is a terrible idea.

Your route back to financial health is going to have to be a mixture of spending less, and / or earning more.

Thrugelmir

The fact that you want to borrow another £1,000 when consolidating your existing debt. Merely reinforces a generic view that you've no control over your finances. While cycling to work may take too long in your eyes. Sometimes we need to help ourselves whatever the inconvenience.