Accepted for 20k debt consolidation loan at terrible APR (14.9%). What to do next?

jen_lync

Looking for some advice please.

Just came back from Santander where I applied for a 20k (over 60 months) debt consolidation loan. You may recall me posting earlier – this is to pay off a student bank loan overseas in Canada. I currently pay 550 each month (I have never once missed or defaulted on this payment) and would like this loan to bring my monthly payments down to 400.

Although I was already pre-approved for 15k on their system and led to believe I’d be a shoe-in for 20k at their advertised rate of 3.5% (and as someone who has all of their business with Santander, including a 123 account and a credit card I pay off each month), the system came back with 20,000 at a rate of 14.9%. I was horrified.

About me: Make 41k + 15% pension, very small loans in UK that are now almost paid off (£1200 for Ikea furniture and bed, £1400 for Commuter Club), ‘good’ credit score on Noddle (4/5) and Clearscore (472).

Now what do I do? I don’t want to rack up too many loan applications in a short amount of time, but some of the ‘soft credit’ searches I’ve done on other sites suggest I could get 20k at a rate of 4-6% over 60 months with others, like Ratesetter or AA (for some reason, the loan eligibility calculator on MSE does not find me in the system).

Should I sit tight for a while or try another loan application in the next week?

Gaz83

You could try another application. Another one probably wouldn't hurt too much.

That being said, I think it very unlikely a lender would give you £20k at such a low APR, especially for debt consolidation. You earn £41k, presumably you already owe £20k, and you're wanting to borrow another £20k. That's £40k debt on a £41k salary.

[Deleted User]

How does 14.9% compare to your current rates?

Hazzinho

You are a risk with that much debt on £41k, you say consolidation but you could blow thatif you wanted, lenders are likely to offer high rates if they accept you. I can't see it being bettered but could be wrong.

Cycrow

The advertised rate is often only available if you borrow a certain amount, usually between £7500 and £15000.

so borrowing £20k is unlikely to get the headline, regardless of your circumstances

jen_lync

Thanks for your comments.

The plan with this debt is to pay off the 20k overseas and stop making monthly payments that incur fees. So I don't anticipate being 40k in debt but rather 20k.

My current rate in Canada is 11% for one of the student loans (undergrad) and 6% for the second (grad).

Would you suggest I try for 15k somewhere then?

marcarm

jen_lync wrote: »

Thanks for your comments.

The plan with this debt is to pay off the 20k overseas and stop making monthly payments that incur fees. So I don't anticipate being 40k in debt but rather 20k.

My current rate in Canada is 11% for one of the student loans (undergrad) and 6% for the second (grad).

Would you suggest I try for 15k somewhere then?

The bank don't know that you will do that though, you say you will but I bet a lot of people would spend it on something else, therefore ending up £40k in debt.

There are lots of threads on here about consolidation loans and how they haven't worked out for people. People take out the loans to pay credit card debt, then run up the cards again meaning they are in debt twice as much as before.

DCFC79

jen_lync wrote: »

Thanks for your comments.

The plan with this debt is to pay off the 20k overseas and stop making monthly payments that incur fees. So I don't anticipate being 40k in debt but rather 20k.

My current rate in Canada is 11% for one of the student loans (undergrad) and 6% for the second (grad).

Would you suggest I try for 15k somewhere then?

As far as the bank are concerned your going to spend he £20know on a car or do renovations.

Yes you intend to pay off the Canada debt which is good as you save money in the long by paying less fees.

jen_lync

Okay, I get that. However, as far as the banks are concerned here, the debt doesn't exist because its overseas and they don't see it.

I also understand your concerns about debt consolidation but just want to reiterate that this is not credit card debt. I've always had good credit and never had trouble with money. This was specifically for student loans, which in Canada are often secured through a bank.

I don't know how else to communicate to the bank what I need the loan for. Debt consolidation seems my only route.

All to say, I think I may investigate 15k loans and see if I have any better luck.

takman

People who take out debt consolidation loans are a higher risk to the bank and are more likely to default on the loans. So that's why they have given you the higher rate. I don't think your likely to get the lowest rate anywhere else either due to what the loan is being used for.

foxy-stoat

jen_lync wrote: »

Just came back from Santander where I applied for a 20k (over 60 months) debt consolidation loan. You may recall me posting earlier – this is to pay off a student bank loan overseas in Canada. I currently pay 550 each month (I have never once missed or defaulted on this payment) and would like this loan to bring my monthly payments down to 400.

£20K over 5 years at 14.9% interest repayments are around £475 - you will only save £75 a month taking out this loan.

How long is the bank loan in Canada for?