Cahoot loan accepted but higher rate than expected...

in Loans
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Legacy_userLegacy_user Forumite
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This evening I applied for a Cahoot loan to borrow 12,000 over 5 years at the advertised 3% rate, the purpose of the loan is primarily for some home improvements and also pay off the little I have left on a First Direct loan at 3.6% which was also used for home improvements. I have around £2000 left on the current loan, which I have been over paying (double the standard payment every month) to clear it off quicker.

I have an excellent credit rating, 5\5 (via Noddle) so was hopeful of getting some funds in whilst reducing my interest payments overall by 0.6%.

Although the loan has been accepted, the rate given was 9.9%, which leaves me in a situation where I don't know what to do, as the rate is far higher than I thought I was going to get, and has really made me think about whether I want to do the improvements at all because of it.

I understand that I have 14 day cooling off period to cancel the agreement under the Consumer Credit Act, but not sure how this will affect my credit score and also what effect it will have on my applying for credit in the future. Should I wait to apply for another once cancelling, if so how long?

Replies

  • ArleenArleen Forumite
    1.2K Posts
    Two good things came out of it:

    1. You've learned that credit scores are meaningless.
    2. You've learned that you don't need the improvements so you can save the money and do them when you have the cash in hand to pay for them rather than getting more credit.
  • Just wanted to say we applied for a Cahoot loan £17k over 5 years to buy a car, same sort of circumstances, good credit, not over committed and got the same 9.9% interest rate, having had a 90% chance of approval off the MSE soft search tool thing. Canceled it and went with own bank instead at 6.9% as didn't want to end up doing so many full apps we ended up declined.
  • SystemSystem Forumite, Community Admin
    177.9K Posts
    10,000 Posts Name Dropper
    Forumite
    Tempestina wrote: »
    Just wanted to say we applied for a Cahoot loan £17k over 5 years to buy a car, same sort of circumstances, good credit, not over committed and got the same 9.9% interest rate, having had a 90% chance of approval off the MSE soft search tool thing. Canceled it and went with own bank instead at 6.9% as didn't want to end up doing so many full apps we ended up declined.

    Thanks, your scenario is exactly the same as mine. I cancelled the application this morning with Cahoot and instead looking to use FirstDirect who are quoting me 5.9%, there rep rate is 3.3% so its a jump but not as much as Cahoot and look to overpay it as I've done with my current loan.

    Still don't really know why I'm not getting the lower rate though, I've never missed a payment and over payed on debts but I guess I will never find out why, which is majorly frustrating...
  • Gaz83Gaz83 Forumite
    4K Posts
    GazLime wrote: »
    Still don't really know why I'm not getting the lower rate though, I've never missed a payment and over payed on debts but I guess I will never find out why, which is majorly frustrating...
    Lenders are in business to make money.

    If you've overpaid on debts, it means that lenders haven't made as much money from you as they expected.

    Ergo, they may offer future lending at a higher rate to recoup an 'acceptable' profit.
    "Facism arrives as your friend. It will restore your honour, make you feel proud, protect your house, give you a job, clean up the neighbourhood, remind you of how great you once were, clear out the venal and the corrupt, remove anything you feel is unlike you... [it] doesn't walk in saying, "our programme means militias, mass imprisonments, transportations, war and persecution."
  • GazLime wrote: »
    Thanks, your scenario is exactly the same as mine. I cancelled the application this morning with Cahoot and instead looking to use FirstDirect who are quoting me 5.9%, there rep rate is 3.3% so its a jump but not as much as Cahoot and look to overpay it as I've done with my current loan.

    Still don't really know why I'm not getting the lower rate though, I've never missed a payment and over payed on debts but I guess I will never find out why, which is majorly frustrating...



    You probably realise this but don't pay off the First Direct Loan with this new loan because you will end up paying more interest.
  • Rule of thumb (generic not precise):

    Longer term = higher rate (over four years)
    Higher amount = higher rate (perhaps over £15k)
    Consolidation = higher rate

    Typically half of applications are declined. Using that example, only 25.5% get the best rate. 24.5% get offered a loan, albeit at a higher rate. 50% are riff raff.
  • takman wrote: »
    You probably realise this but don't pay off the First Direct Loan with this new loan because you will end up paying more interest.


    Yes, you should continue with your old loan and reduce your new loan requirements.


    Or, you could pay off that old loan before applying for a further loan or committing additional spend ... it sounds like you're getting there.
    174 BPM >> CC Balance (0%) -£3,565.99 - Target DFD Dec 2017 >> Loan (Car) (3.1%) -£19,803.74 - Target DFD Nov 2020
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