TIme between loans - what's the deal?

jackwww

Hi MSE, looking for any advice on this obscure question.

How long do I need to wait between paying off one loan (early) and taking a new one? I ask this as with £305 coming out of my account every month at present, I assume I'm unlikely to be accepted for the second loan whilst the first still shows up on a credit check?

My situation:
Have a loan at present (around 6k)
Would like to make a new purchase - classic car, appreciating asset.
A friend is happy to pay off my loan (6k)
I will then take a loan of 14k, pay back the 6 and use the 8 to purchase said car


Thank you in advance

EDIT: loans to be with separate companies, if that makes a difference. Existing one = Halifax. New one = AA

Early repayment not an issue with Halifax, they have given me a quote to pay it off.

Pixie5740

You can have more than one loan at the same time providing lenders think you can afford them. I'm not sure why you need to involve your friend at all in your scenario. You could just apply for a £14k loan and if you're accepted (and happy with the rate) get a settlement figure for your original loan and then buy the car. Alternatively you could keep your £6k loan and apply for an £8k loan.

jackwww

Hi Pixie5740

Yes that was my original plan, however:-

1. If denied the 14K loan, it'll leave a bad mark on my credit score (as far as I'm aware) and will then make it harder to get a mortgage in ~12months or so

2. Using a 14K loan over 4 years is easily affordable for me. However tacking on an 8K loan to my existing one makes the repayments much higher for the next 18 months (that's what's left on the 1st loan)

My train of thought is this - if I pay off the first loan, I am then more likely to be accepted for the 14K loan...

DCFC79

jackwww wrote: »

Hi Pixie5740

Yes that was my original plan, however:-

1. If denied the 14K loan, it'll leave a bad mark on my credit score (as far as I'm aware) and will then make it harder to get a mortgage in ~12months or so

2. Using a 14K loan over 4 years is easily affordable for me. However tacking on an 8K loan to my existing one makes the repayments much higher for the next 18 months (that's what's left on the 1st loan)

My train of thought is this - if I pay off the first loan, I am then more likely to be accepted for the 14K loan...

I rate you as 3x Asda economy rich tea biscuits. Send me £5 a month and I'll upgrade you to 10x chocolate Hobnobs next year which increases your score.

Your credit score is not seen by lenders so don't go on that being a bad thing if it drops.

Im pretty sure all that will be shown will be a mark that a search was made and an entry will be added if you took out the loan.

jackwww

DCFC79 wrote: »

I rate you as 3x Asda economy rich tea biscuits. Send me £5 a month and I'll upgrade you to 10x chocolate Hobnobs next year which increases your score.

Your credit score is not seen by lenders so don't go on that being a bad thing if it drops.

All that will be left will be a mark that a search was made and an entry will be added if you took out the loan.

Think I see your point - so trying for the 14K loan now, even if I get rejected, is not the end of the world?

Take the loan, pay off the first one, keep the 8K change. Don't involve the friend.

Sound about right?

DCFC79

jackwww wrote: »

Think I see your point - so trying for the 14K loan now, even if I get rejected, is not the end of the world?

Take the loan, pay off the first one, keep the 8K change. Don't involve the friend.

Sound about right?

Its all about affordability as to whether a lender will lend, they take into account your salary plus other commitments plus whats on your credit history.

First of all have you checked your credit files with the 3 agencies before you apply ? eg Noddle, Credit Expert (can get the free one or the £2 report) and Equifax (or use clearscore).

jackwww

DCFC79 wrote: »

Its all about affordability as to whether a lender will lend, they take into account your salary plus other commitments plus whats on your credit history.

First of all have you checked your credit files with the 3 agencies before you apply ? eg Noddle, Credit Expert (can get the free one or the £2 report) and Equifax (or use clearscore).

I've not - will do that at home tonight before I apply.

I guess I'm looking for any marks on it that refer to me having non-payments/late payments/denied loans etc etc.

Have never made a late payment to anyone, and have gone overdrawn by a couple of £ maybe 3 times in my life so I' sure its relatively clean

DCFC79

jackwww wrote: »

I've not - will do that at home tonight before I apply.

I guess I'm looking for any marks on it that refer to me having non-payments/late payments/denied loans etc etc.

Have never made a late payment to anyone, and have gone overdrawn by a couple of £ maybe 3 times in my life so I' sure its relatively clean

Get a copy of the reports and take it from there.

Pixie5740

Try the MSE Loan Eligibility Calculator to gauge the likelihood of getting a £14k loan in your current circumstances before applying.

Mahsroh

Why do the loans have to be with two separate companies?

Previously I had a loan with HSBC with about £3k (plus interest) and 10months left. I wanted to get a new loan of around £10k - I went to HSBC who gave me a loan for £13k but took £3k of it and settled my existing loan, leaving me with the initial £10k I asked for.

Obviously it depends on your circumstances / affordability etc, but I would suggest speaking to Halifax whom your existing loan is with.

SeanG79

The other option is vehicle finance secured against the vehicle if you cannot get approved for a personal loan.

The rate is likely to be higher than the personal loan however.