Am I doing the right thing?

livvie84

I have been stuck in a rut for a number of years and have been unable to clear a small amount of debt - I have been spreading the payments (just over the minimum) rather than clearing anything. A couple of cards are near the limit.

Despite the relatively small amount and regular payments, I am struggling to get accepted for a loan I need to start a business (due to my current disposable income).

My question is, if I concentrate on clearing one or more item(s) will this automatically improve my chances? Would I have to close the accounts too? Or am I best doing what I am doing now but increasing each payment a little?

Thanks!

Pixie5740

If you're unable to clear what is, in your words, a small amount of debt, how will you be able to afford loan payments on top of your current debt payments? Also note that if you intend to use the loan to start up a business you will need to apply for a business loan rather than a personal loan. That usually means going to the bank with a business plan.

livvie84

Pixie5740 wrote: »

If you're unable to clear what is, in your words, a small amount of debt, how will you be able to afford loan payments on top of your current debt payments? Also note that if you intend to use the loan to start up a business you will need to apply for a business loan rather than a personal loan. That usually means going to the bank with a business plan.

The loan won't be on top as I plan to use some of it to consolidate the rest.

If and when I am ready for the business loan ... a lot of the business loans I have seen are for existing businesses. If anyone knows of a good company to get a start up business loan, please let me know!

Pixie5740

Like this? https://www.gov.uk/business-finance-support/start-up-loans-uk

Ben8282

Forget the loan. You will not get one until the balances on your cards are reduced and are no longer near the limits.
Try to pay more each month and get the balances down. That is the best and only option you have..

livvie84

Pixie5740 wrote: »

Like this? https://www.gov.uk/business-finance-support/start-up-loans-uk

Ha! That could work! Didn't get that when I searched for some reason!

livvie84

Back to my original question... will clearing just one debt and cancelling the card improve my eligibility right away?

Pixie5740

Maybe but possibly not. Certainly credit utilisation and affordability play a part when lenders determine whether to lend to you. However, lenders only receive information for the credit reference agencies once a month, once every two months in some cases, and some lenders might be even less frequent than that. This means that although you might clear a credit card one day the lender you then apply for a loan from might not know that for a few weeks or possibly even over a month.

Ben8282

livvie84 wrote: »

Back to my original question... will clearing just one debt and cancelling the card improve my eligibility right away?

Clearing the debt will improve your eligibility as soon as the information has been updated with the CRA's. Unless you are in a position to actually check wait 2 months. DO NOT CANCEL THE CREDIT CARD ACCOUNT.
Obviously this debt is not the only factor but assuming nothing else untoward on your credit files your chances of obtaining the loan should improve once this debt has gone.

System

Given you're effectively living hand to mouth is starting a business the best idea, especially if you are quitting what job you do have?

It takes a while for the money to start to come in with a new business.

DCFC79

Start the new business whilst still working full time unless your confident it will take off.