Loan advice (high interest rate...)

ryanm8655

Hi there,


Erroneously I refinanced a load of debt (overdraft, credit cards and an existing loan) a year ago with my bank (HSBC) and despite being told I'd get a rate of 5% on the prechecks I ended up being offered 16.9% or something ridiculously and stupidly accepted (at the time I was stressing about money and not thinking straight) but what is done is done...The loan was for £13000 in total, with total repayments of £19000 over 5 years...


The repayment period is 5 years and I have a further 4 years of repayments at about £316/month.


I have a new job and am now earning a fair chunk more than I was at the time and want to get it cleared asap so that I can start saving for a deposit for a house...


I have no idea why I got such a poor rate, I've never missed payments for credit cards etc. Have had plenty of credit cards I've cleared in full, had a phone I have never missed a payment on since I first got one at 18...the only thing I can think of is I move a lot...(on average every 6months to a year) I live in London and so tend to move from flatshare to flatshare...I also wasn't on the electoral roll until about 6 months ago (well I was but at an out of data address). The previous loan I consolidated was at 8% which wasn't great but I thought it would improve as I was earning about 50% more than I earned when I took out that loan.


I went into the bank to find out how much it would cost to clear the loan in full (I can pay back early but have to pay the amount in full) and while there checked to see if I could get a better rate but the rate I was offered was exactly the same...despite earning another 50% more than this time last year...


Last week I went on a comparison site to check out loans and the one that it said I had the highest chance of approval with stated they were "unable to provide me with a loan at this time"...I had that day update my bank account address with my London address for which I am on the electoral register as I thought that would improve things so am wondering if there were issues finding my credit file...


I have now signed up to Experian to see if there is anything dodgy on my file but am awaiting the pin to get started...


Any ideas for what would be causing such a high rate and also how I can get the rate down?


In an ideal world I'd like to take out a loan at a lower rate and pay it off over 2 years (@£550/month approx.)...


I have credit cards with Santander that I rarely use so could see if they will give me a better rate loan, likewise I have a bank account with NatWest I only use for the travel/phone insurance and pay the monthly fee for so could try them...but I assume there is some fundamental issue with my credit file so there is little point...


Worst case, I refinance at the same rate from HSBC but over a shorter period so that I pay back less overall...


A bit of a mess...advice much appreciated...


Cheers,
Ryan

PeacefulWaters

Unstable address history and loan purpose consolidation are your biggest issues. Longer term might not help either.

Have you tried Ratesetter? Zopa? Admiral?

ryanm8655

I haven't tried those but will check them out. EDIT: Zopa was the one I tried that at the prechecks (having followed a link from comparison sites) stated that they were "unable to offer me a loan at this time".


I've also started cancelling credit cards I no longer use (I have about £9k available credit on them) as I heard this can have an impact?


All I have tried so far is HSBC, but as they are my bank and also offer one of the most competitive loan rates I wasn't optimistic anywhere else would be better?


Will it matter that I have recently updated my address with my bank? Previously I used my parents address and when I input my current address into comparison sites it says they are unable to find my credit file... Is there a time I need to wait for that address to be updated on the credit file?


Thanks,
Ryan


EDIT: Just got a quote from ratesetters based on a soft search...rate of 10.9% and monthly repayments of £556.13 based on repaying over 24 months. That's an improvement but still high, and I am also wary it could increase if I click apply as a similar quote from HSBC was 5.5% and increased to 16.9% when I clicked apply...

Gaz83

If your bank are comfortably receiving payments from you at a high interest rate, there's nothing to be gained (from the bank's point of view) from allowing you to refinance at a lower rate. Banks exist to make money for their shareholders.

If you're looking to pay it off quicker at a higher monthly payment, why not just overpay?

ryanm8655

Fair point re: high street bank...


I didn't realise overpayment was an option...


But having read the loans section of this website (I wish I had done so sooner) I would have done...


Can I do so without penalty?


Thanks.

Gaz83

You'd need to check the T&Cs of your loan agreement, but most loan agreements allow you to repay without penalty, although some limit the amount you can overpay by each year.

ryanm8655

Thanks. From reading the loans section it seemed like legally you had to be allowed to overpay by up to £8000 each year but I may have misinterpreted.


Have just done an application through admiral so will see what happens...


It would be so nice to be debt free within 2 years...

Gaz83

ryanm8655 wrote: »

Thanks. From reading the loans section it seemed like legally you had to be allowed to overpay by up to £8000 each year but I may have misinterpreted.


Have just done an application through admiral so will see what happens...


It would be so nice to be debt free within 2 years...

You've also got to contend with the fact that many lenders will simply not trust that you'll use the 'new' loan to pay off the 'old' one, and thus they'll assess you based on potentially having twice as much debt as you already have.

ryanm8655

Hmm...that's frustrating...


Just reading about 0% cash transfer credit cards, which could be a way to reduce the liability of the loan and pay a chunk off early...did an eligibility check and my address isn't coming up on the credit bureau...it says if I have recently moved then it may take a month to update...

DCFC79

Sign up to Clearscore and Noddle too, Noddle is the least used of all 3 apparently.

Thrugelmir

Debt consolidation = High rate

Statistically you are highly likely to reoffend i.e. continue to spend beyond your means or default.

Nothing personal but that's the profile category you reside in currently.

To help yourself. Watch the pennies and they'll make pounds. Use the pounds to overpay the loan. That way you'll pay a lot less interest and clear the debt quicker.

There's no such thing as a free lunch. Everything has to be worked for.