Getting Another Loan Question?

byronwells

Gaz83 wrote: »

Doesn't matter.

That's absurd... If I was suppose to pay it back in a year then I could understand but because it is spread out over 5 years on a monthly basis then it should matter

Gaz83

byronwells wrote: »

That's absurd... If I was suppose to pay it back in a year then I could understand but because it is spread out over 5 years on a monthly basis then it should matter

To take your argument to its logical conclusion, are you suggesting that people earning only £4,000 per year should be allowed to borrow £10,000? Two-and-a-half times their annual salary? People earning £10,000 should be allowed to borrow £25,000?

ReadingTim

It's also absurd that it's based on gross pay when we all have to pay taxes, but there it is.

'50% of salary' is just a rule of thumb, not an exact science. However, it's the lender's money, so it's their rules. Play by them, or don't get the money - it really is that simple.

Candyapple

byronwells wrote: »

That's absurd... If I was suppose to pay it back in a year then I could understand but because it is spread out over 5 years on a monthly basis then it should matter

Look at it from the lender’s point of view; you earn £18,500 and already have £10k worth of unsecured debt in the form of a loan. You now want to take out an additional £5k bringing your total unsecured debt up to £15k (this is presuming you have no other debt in the form of credit cards or overdrafts etc. mind you).

So, on a salary of £18,500 you want to take out nearly 90% of your salary in unsecured lending – the lender doesn’t know if you’ll use that additional £5k to clear part of the other loan or if you will blow it all on a luxury holiday, the risk to them is obviously high because what happens if you lose your job or become ill? These additional risk factors are calculated in the rate they set when they offer you a loan. You have a higher than normal risk of defaulting on your repayments, more say than someone who earns £40k for example because you are so close to your salary. The keyword here is affordability.

Either way, regardless of whether you think it’s absurd or not, that’s the way most companies operate. If you want to take out another loan with a different company to Tesco to clear your 7% loan, at least try using the soft search applications before committing to anything.

Tixy

You have a limited credit history
You want to borrow a high amount compared to your income.
You want to extend a loan you too out last year.

Tesco have based their lending decision on this and the other information then know about you and have determined that for them you are a low enough risk to offer a loan but not a low enough risk to be offered their lowest rate.

You could try applying elsewhere, its possible a different lender will offer you a lower rate.

Your own bank may be an option to consider (assuming you have run the account with them well).

byronwells

What you mean by soft search applications please??

Candyapple wrote: »

Look at it from the lender’s point of view; you earn £18,500 and already have £10k worth of unsecured debt in the form of a loan. You now want to take out an additional £5k bringing your total unsecured debt up to £15k (this is presuming you have no other debt in the form of credit cards or overdrafts etc. mind you).

So, on a salary of £18,500 you want to take out nearly 90% of your salary in unsecured lending – the lender doesn’t know if you’ll use that additional £5k to clear part of the other loan or if you will blow it all on a luxury holiday, the risk to them is obviously high because what happens if you lose your job or become ill? These additional risk factors are calculated in the rate they set when they offer you a loan. You have a higher than normal risk of defaulting on your repayments, more say than someone who earns £40k for example because you are so close to your salary. The keyword here is affordability.

Either way, regardless of whether you think it’s absurd or not, that’s the way most companies operate. If you want to take out another loan with a different company to Tesco to clear your 7% loan, at least try using the soft search applications before committing to anything.

Candyapple

https://www.moneysavingexpert.com/eligibility/loans-calculator/

Or check to see if the lender directly offers a soft search, e.g Nationwide who will offer you a soft search and give you a quote, you can then choose to proceed or not.

byronwells

Candyapple wrote: »

https://www.moneysavingexpert.com/eligibility/loans-calculator/

Or check to see if the lender directly offers a soft search, e.g Nationwide who will offer you a soft search and give you a quote, you can then choose to proceed or not.

Unfortunately the quotes are not the true reflection.. Hence Tesco says you can get 3,7%apr, however you only find out exactly what you get until you do an actual application...


So it is really a guessing game when search for quotes, because have no idea until application is done if the apr is correct or not.. And then the more applications you do affects your credit

Gaz83

byronwells wrote: »

Unfortunately the quotes are not the true reflection.. Hence Tesco says you can get 3,7%apr, however you only find out exactly what you get until you do an actual application...


So it is really a guessing game when search for quotes, because have no idea until application is done if the apr is correct or not.. And then the more applications you do affects your credit

Pretty much.

That's just the way it is. Lenders don't publicise their own lending criteria, so it's as much of a guessing game for everyone as to what interest rate one will be offered.

Candyapple

byronwells wrote: »

Unfortunately the quotes are not the true reflection.. Hence Tesco says you can get 3,7%apr, however you only find out exactly what you get until you do an actual application...


So it is really a guessing game when search for quotes, because have no idea until application is done if the apr is correct or not.. And then the more applications you do affects your credit

I didn't think Tesco offered a soft search application? The 3.7% rate they advertise is the headline rate.

I know Nationwide will offer you a rate quote based on your soft search of your credit files so you can then proceed from there, that’s far better than applying blindly so to speak, hoping that you will get the headline rate when if you applied with a lender who offered the soft search facility, you may have avoided wasting a credit search for no reason if it turned out you would be offered say 15% instead of 3.7%.