Loan advice please

stargirl181

Hi there,

I was wondering if I could have some advice. My boyfriend and I would like to be able to buy a house within the next three years - we have the deposit, the issue is my credit rating. I've been looking around and I've found that I qualify for a guarantor loan of £5000 (with my mum being guarantor) which would mean a monthly repayment of approx £200 - this is much less than what I pay in total a month on my debts currently and would mean that I would wipe out pretty much all of them in one go. I haven't applied for anymore credit in over 18 months and am paying each debt off on time (albeit very slowly) - my question is this...

Would consolidating and paying off all my debts with one loan make my credit rating better (on the assumption that I pay the monthly repayment of the loan on time each month) and make my chances of a mortgage better even though I've got a loan? As I would have paid off the debts that are really harming me.

Arleen

Credit rating is pointless, what is on your file matters. So what's on there? Any late payments? Defaults?

How much do you owe, across how many cards and what is the APR on them? What will be the APR on the loan, and total cost of it? Consolidation only makes sense if it means you will wind up paying less, not more, as it doesn't "wipe out" the debt, but simply shifts it to a loan. That is assuming you won't rack it up on cards again.

MallyGirl

have you looked at the APR for the guarantor loan versus what you are currently paying? They usually have horrendously high rates.

If your Mum is prepared to be a guarantor is there no way she could just lend you the money herself - it would be a lot cheaper and no more risk for her than being liable for a high APR loan if you don't keep up the payments

stargirl181

Thank you. Yes I've done the calculations and paying everything off with one loan reduces my monthly payments by £400 and then settles my one defaulted account (currently on arrangement to pay) and all credit cards. I've been budgeting sensibly for the last 18 months and have been living within my means.

Arleen

stargirl181 wrote: »

Thank you. Yes I've done the calculations and paying everything off with one loan reduces my monthly payments by £400 and then settles my one defaulted account (currently on arrangement to pay) and all credit cards. I've been budgeting sensibly for the last 18 months and have been living within my means.

But that is only your monthly payment, how much will you have to repay in total on it?

[Deleted User]

stargirl181 wrote: »

As I would have paid off the debts that are really harming me.

All you will have have done is move from owing one amount of money to someone, to owing the same amount of money to someone else.

National_Debtline

Hi Stargirl181,


Your credit worthiness is determined by your history and can be impacted by your age, whether or not you are on the electoral role, financial history (of course), anyone you may be financially associated with etc. Therefore, it is hard to say if a consolidation loan would improve your rating.


One thing you do need to be careful with when taking out a consolidation loan is racking the credit back up again on your other debts, which, sadly, is more common than you think. Some financial advice may help. You can try the Money Advice Service or an independent financial advisor (but just be careful of costs with the later).


Laura
@natdebtline

WillyWonga

Guarantor loans are expensive and if your mum has a good credit rating and she trusts you to pay it back then she is best of getting a loan herself and giving you the money.

Guarantor loan company interest 49% or so for £5000

Best bank loan available for same amount - possibly 3 or 4%

The guarantor loan company will score your mum the same as the high st bank. They will pay the loan to her and not you, basically they are dealing with your mum. You fail to pay back and your mum is chased for payments and made to pay to stop her credit rating being trashed. Get a High St loan and if you stop making payments then your mum has to pay back. Whats the difference??? Not much at all apart from vastly lower repayments.

sourcrates

I think you would be better advised to seek help repaying the debts you currently have, rather than adding to them at the extortionate rates of interest these companies charge you.

If for any reason you can't pay it, your mum will be liable for the remaining payments till the end of the loan.

Ignoring your credit score, and contacting stepchange on the other hand, and getting them to get your creditors to freeze interest whilst you repay what you owe at an affordable rate, sounds a much better plan to me.

MrsMs_2

If you've already saved a deposit for your house, would you not be best using that to pay off any remaining debt, and then using your current debt repayment to add to the savings to build up the house deposit to the former level?

If you did that, you'd clear the debts, settle the default, and not have to pay any interest to anyone, plus, you're not involving anyone else in your finances. Whilst you're rebuilding the house deposit (£600 a month I think you said), you can be earning a little interest and the passage of time will allow your credit file to heal somewhat.

mrmagooooooo

Please dont get that loan. If its a guarantor loan im guessing its 200 over 5 years which would make the APR 54.5% which is just bonkers!