Consolidation & credit rating ?

Kev64

Having spent the evening logging onto all my accounts and totting up - I'm about to get drunk because my current personal debt is a few quid off sixteen grand. _pale_

I've made a spreadsheet up with the interest rates on various cards etc, and I'm planning on consolidating the more expensive ones into a personal loan. I did manage to get the M&S balance transfer deal at 3.9% for life, so not all of the debt will go onto any loan. Either way, I should be able to get a loan at a significantly lower rate than what I'm paying on the other cards.

My question is:- When you apply to a loan company with the intention to consolidate, they then check your credit rating. However, do they take into account that your current debts will be cleared by the loan - or do they (or their computer systems) just assume that you want to get another umpteen grand further in debt ?

I'm concerned that when I apply for loans now, I will be refused on the basis that I'm 16k in debt already !

jay78

Kev64 wrote: »

However, do they take into account that your current debts will be cleared by the loan - or do they (or their computer systems) just assume that you want to get another umpteen grand further in debt ?

Yes they do take it into account if you tell them that's what it's for! I've just got a loan out for consolidation purposes.

Kev64

I usually do everything online - do the loan websites actually ask you what the loan is for ? I have been careful not to go too far into an online application to see, in case the very act of applying affects my credit score.

jay78

Kev64 wrote: »

I usually do everything online - do the loan websites actually ask you what the loan is for ?

Natwest do.

Lizzy

There are companies that will ask you what they are, you supply the account numbers and they pay them off for you. Sorry but I don't know who they are (not much use I know) but I think that sort of company obviously don't trust you to do it yourself so I think they may have a higher APR than most.

If you have a good credit rating a home improvement loan usually gives you a longer term. For example I used to underwrite loans but it was many years ago things may have changed, a car loan was max 3 years, consolidation 4 years and home improvement loans 7years. Although non of this was advertised. No checks were ever made (on the purpose of the loan)but of course these were unsecured loans. If you have not made any loan applications for a while a couple of applications won't do any harm and at least you will know where you stand. If you really want to be safe get a copy of your credit report and you might find out that you are a fantastic customer. What will not look so good if if you are at the top of your credit card limit on all of them, It may smack of desperation (even though it is). If you know this is the case and you get turned down spend some time reducing the balance as much as you can, easier said than done I know. Also if you are a good customer with your bank they may look at a loan for you.

Good luck

jay78

jay78 wrote: »

Natwest do.

Btw, if you say you're consolidating credit cards, they will ask you to send statements to support your application.

Kev64

Well, I applied to the Alliance & Leicester for a 13k loan over 4 years, but have just received the refusal letter. There is an option to challenge the decision, but I'm not sure if that's likely to prove useful

!!!!!!.

jonesMUFCforever

Kev64 wrote: »

Well, I applied to the Alliance & Leicester for a 13k loan over 4 years, but have just received the refusal letter. There is an option to challenge the decision, but I'm not sure if that's likely to prove useful

!!!!!!.

I would do that first before applying elswhere and using up another credit score.
Too many credit applications in a short space of time can seriously damage your credit score.

Have you also spoken to your main bank where your salary goes into to discuss a loan?

Kev64

Ok, Ill try writing to A&L to see if they will reverse the decision.... meantime, can anyone tell me why Lloyds are advertising loans at 8.9% on the front page of their website, yet when I go to apply online (I bank with them), the rate shown suddenly appears at 14.4% !! ???

Surely my own bank isn't doing an instant credit score on me before I actually click on the 'Apply' button ?

Also, my wife's past finances have been pretty poor, but we've always endeavoured to keep things separate so that her score doesn't affect mine. We did have a joint loan many years ago, before we were married, that she had problems repaying. How long will the credit reference agencies hold that against me ? - and is there any way of finding out if our records are still linked ?

inmypocketnottheirs

I would advise against a consolidation loan. This is generally an expensive way of getting out of problems. You may well benefit by popping over to the debt free wannabe section and posting a full statement of affairs to see how the guys n gals over there can help you free up some funds to pay off your debts quicker without borrowing more money.

Plus, one has to be extremely well disciplined not to run up credit card balances again once the consolidation loan has cleared them.

In order to stay out of these problems, it means a total review of your finances. As Martin says, what have you spent the money on? If you are 16K in debt, was it for a new kitchen, a conservatory, a world cruise? If it was just because of over spending, putting the weekly shopping on the cards, birthday and christmas present etc, then you are overspending. What is going to change then to prevent this happening again?

As I say, pop over to the debt free wannabe section and just see what is possible there without borrowing more money. It may just open your eyes. It did me!

HTH

Kev64

inmypocketnottheirs wrote: »

I would advise against a consolidation loan. This is generally an expensive way of getting out of problems.

Why ? If I'm being charged double the interest rate on the credit cards than I would be on a consolidation loan, why is it an 'expensive way' ?