Preparing For Loan Application

ohreallyimok

I currently have a loan of ~£15,500 with Natwest, which I have had for a couple of years. This was for debt consolidation and university (MA) fees.

Since taking this loan out my circumstances have changes significantly and I am starting to realize what a bad decision the loan was in the first place. Especially given that it is at an outrageously high 12.9% APR.

I am now looking to take a new loan out at a lower interest rate to clear the Natwest loan and get it paid off as quick as possible. When checking the various online eligibility calculators I have noticed something that I do not understand -

I am now earning significantly more than I was when taking out the loan and have never made a late payment. Around 6 months ago I moved house. Although I am on the electoral roll at my new address, when I use this address for eligibility calculations I get 0-20% likelihood for any loan. When I use my old address this jumps to 70%+.

What could be causing this? Is this likely an issue with the calculator? What can I do to increase my likelihood of loan approval?

I am ideally looking for a provider that will allow me to overpay when possible as I am keen to get it paid off as quick as possible. That being said, the interest rate is the real focus.

Many thanks in advance.

[Deleted User]

Remember that you will be seen as having a 15k loan so if you want to borrow another 10k that would be a 25k exposure plus any other debt you may have e.g CC's so you would need an income of at least 50k.

PeacefulWaters

outrageously high 12.9% APR

It might not be market leading, but given the amount and the loan purpose I think you did pretty well.

StopIt

Probably an error in how the checker works as where you live has no impact on credit eligibility and you'll need to provide your current and previous address if you've only lived there for 6 months anyway.


Anywho, when the calculations on loans like this are made, they assume that you do not clear the existing debt, meaning you'll be judged on affordability and income to debt ratio on £15k + the new loan.


This may make any APR offered worse than you may expect, although there's no harm in trying an application to a provider with a high % chance and seeing what APR thery come up with.


If the APR offered isn't to your liking, could you consider a Money Transfer 0% card to take some of the debt into a 0% APR situation? If you earn more now you can use the excess income to pay off this card before interest is chargable and it'll save you money overall. See the MSE money transfer guide here: https://www.moneysavingexpert.com/loans/cut-loan-overdraft-costs


Can you make overpayments on the loan to reduce total interest paid?

ohreallyimok

Thank you all for your replies, it is much appreciated. I had assumed that potential lenders would take into account the fact that a pre-existing loan would be cancelled out with the new one! Lesson learned.

StopIt wrote: »

Probably an error in how the checker works as where you live has no impact on credit eligibility and you'll need to provide your current and previous address if you've only lived there for 6 months anyway.

Perfect, thanks, I was hoping this would be the case. I wasn't sure if moving was perhaps seem as 'unstable' or something similar.

Anywho, when the calculations on loans like this are made, they assume that you do not clear the existing debt, meaning you'll be judged on affordability and income to debt ratio on £15k + the new loan.






This may make any APR offered worse than you may expect, although there's no harm in trying an application to a provider with a high % chance and seeing what APR thery come up with.

As above, this is really good to know, and counter to what I thought would be the case!

If the APR offered isn't to your liking, could you consider a Money Transfer 0% card to take some of the debt into a 0% APR situation? If you earn more now you can use the excess income to pay off this card before interest is chargable and it'll save you money overall. See the MSE money transfer guide here:






Can you make overpayments on the loan to reduce total interest paid?

Absolutely, that is something I will look into, thanks for the suggestion. However, the cards I can find listed on bank sites, etc. seem to only have <2000 GBP limits, despite the Money Saving Export credit card search listing up to 10000 GBP. Am I missing something here? Do you simple bank transfer away from these cards to standard bank accounts?



My guess is the goal would be to put as much as possible on a card, while ensuring I could pay it off within the interest free period, and then continue to make the scheduled loan repayments in addition?



Currently my loan is with Natwest who will not accept overpayments, but this is something I would like to do and part of the reason initially that I started looking elsewhere - And then realised that my APR was a lot higher than advertised elsewhere. Although, judging from what I have now read since, this is likely 'best case' APR and not what I would be offered.



Ideally, I'd love a loan provider that accepted my standard 310 GBP/mo or so direct debit, but that I could also pay over flexible amounts as possible.