Consolidation Borrowing Issue

Chris1397

Hi


I have in the past been quite bad with my money due to certain reasons, I'm now in a good way however the past is putting added pressure on my finances. I have tried to consolidate two debts my bank Lloyds are happy to help but at an APR of over 20%, they advised I looked elsewhere which I did, my credit rating is excellent and I can reduce my outgoings by over £200 a month and save also on interest approx. £2000 over the term, the trouble is that no bank or loan company will approve as they will not trust that the money they pay to me will consolidate the debt, I have asked if they could clear the debt direct but apparently this cannot be done.


Has anybody been in this situation before and is there a way round the situation and/or is there a company that can clear the debt direct and offer a decent APR loan?

Gaz83

Chris1397 wrote: »

Hi


I have in the past been quite bad with my money due to certain reasons, I'm now in a good way however the past is putting added pressure on my finances. I have tried to consolidate two debts my bank Lloyds are happy to help but at an APR of over 20%, they advised I looked elsewhere which I did, my credit rating is excellent and I can reduce my outgoings by over £200 a month and save also on interest approx. £2000 over the term, the trouble is that no bank or loan company will approve as they will not trust that the money they pay to me will consolidate the debt, I have asked if they could clear the debt direct but apparently this cannot be done.


Has anybody been in this situation before and is there a way round the situation and/or is there a company that can clear the debt direct and offer a decent APR loan?

How much are you looking to borrow, and how much is your salary?

There's no right to credit, if you can't find a company willing to lend to you, then you're pretty much stuck with the existing credit.

ReadingTim

As far as I'm aware, there's no company which pays off your other debts direct in the manner you suggest - instead they pay you, and trust you pay the debts. Or rather, don't trust that you will, so don't lend the money in the first place. Basically, your post encapsulates the "debt consolidation loan" myth. As an aside, I've often wondered if there isn't a gap in the market for this kind of product, but perhaps someone will tell me why it won't work...

One other point - every penny of interest etc you save yourself is a penny of profit you deny the banks. So they're unlikely to be too keen on offering you a lower rate if they get less money out of you. They exist to make a profit for themselves, not provide a service to the community!

Chris1397

GAZ 83
The amount I want to borrow is in excess of £21k, I have a salary of excess of £40k, the credit is not the issue it's more the trust


Reading Tim
I understand the interest reasoning of why Lloyds don't want to offer a lower rate, I'm sure there is a way around this and need to source the solution

SuperAllyB

From the banks point of view, IF you don't pay off your existing debts with the loan then you will have borrowings at least equal to your annual salary.

DCFC79

Chris1397 wrote: »

GAZ 83
The amount I want to borrow is in excess of £21k, I have a salary of excess of £40k, the credit is not the issue it's more the trust


Reading Tim
I understand the interest reasoning of why Lloyds don't want to offer a lower rate, I'm sure there is a way around this and need to source the solution

With you owing half of your salary in debt I can't see a lender helping you out.

Have you looked at your spending ? Might not help much but it could free up some money to put toward the debt.

Gaz83

Chris1397 wrote: »

GAZ 83
The amount I want to borrow is in excess of £21k, I have a salary of excess of £40k, the credit is not the issue it's more the trust


Reading Tim
I understand the interest reasoning of why Lloyds don't want to offer a lower rate, I'm sure there is a way around this and need to source the solution

Presumably then you already owe £21k. Looking to borrow £21k means that you'll have a debt of £42k, regardless of what you plan to do with the £21k you've just borrowed.

Can't see it happening, to be honest. I'm astonished you've been offered it at all, let alone at a rate of 20%.

bargainbetty

If you have a semi-recent history of being bad with money (within the last six years) you are going to struggle to obtain such a high value loan to refinance your existing debts with many banks.


If Lloyds are willing to help and the 20% interest rate is an improvement, why not take it, spend a year or so paying it perfectly (make over-payments too using that £200 per month you will save) and you might be in a better position to apply for better terms in a year or so.

foxy-stoat

Consolidation loans are more expensive than a loan to buy a car say, even more so when your owe half of your gross annual salary.

Whats your 2 debt amounts, interest and the amount your currently paying and how long till they are paid off?

Is the £20K @ 20% you have been offered cheaper than your current debts or will it be paid off over a longer period?

Are you adding to the debt and are you managing to save anything at the end of the month?

You may have to over pay your highest interest debt first until the combined debt is say 25% of your annual salary and look to borrow - or can you down value your car, sell stuff or stop spending as much to clear your debt faster?

You cannot borrow your way out of debt.

Pixie5740

If you can't get a loan at a half decent rate (have you tried the MSE Loan Eligibility Calculator) then look at snowballing your credit card debts to get them paid off as quickly and as cheaply as possible. Even if you could transfer some of your debts to 0% credit cards it would help.

If you haven't already realised the credit scores made up by the credit reference agencies are like a broken pencil...pointless, as no lender uses them. Lenders use your credit history and other data to determine whether or not to lend to you but they categorically do not use the scores.

MEM62

Chris1397 wrote: »

GAZ 83
The amount I want to borrow is in excess of £21k, I have a salary of excess of £40k, the credit is not the issue it's more the trust

No - it is the credit. You already have borrowing circa 50% of your salary. This is the limit of the comfort zone for most mainstream lenders. If the interest rate offered by your bank is less than that applied to your current debt then take the loan. But, if the debt is on CC, only if you can be disciplined enough not to ramp up the debt again.