Purpose of loan

freeman3030

Hi all,


Just a quick question. I'd like to apply for a loan to do up my kitchen (requires knocking down a couple of walls and replacing kitchen) and also consolidate my two credit cards. However I'm unsure whether when applying for the loan under 'purpose of loan' should I say its to:


Consilate Debts
or

Home improvements


Or should I contact the lender and tell them this is my plan. Once I've updated the kitchen I plan to sell the house and pay off the loan early with the proceeds of the sale.



Many thanks

foxy-stoat

I would put down the reason that you spend the most on.

Bermonia

A couple of schools of thought here, Home improvements loans are seen as adding value to assets as such there is a higher rate of acceptance for these - although any outstanding debts that are not down as being cleared off will impact your affordability assessment. Consoloans have lower rate of acceptance but will have a lesser impact on affordability criteria.

I would be inclined to tell your lender that you are doing both, however 50% or more of it is for home improvements.

Hope this helps

DCFC79

If you do consolidate the 2 cards close them or just don't use them.

freeman3030

Thank you for the replies. I had exactly the same though with regards to improving the value of my home but my current credit card repayments are going to effect me affordability even though they will be going once I receive the loan to pay off the cards.
I'll certainly be contacting the lender before applying. Thanks for your thoughts

[Deleted User]

freeman3030 wrote: »

Thank you for the replies. I had exactly the same though with regards to improving the value of my home but my current credit card repayments are going to effect me affordability even though they will be going once I receive the loan to pay off the cards.
I'll certainly be contacting the lender before applying. Thanks for your thoughts

Have you considered approaching your own bank for the loan, at least you would be able to discuss with a real person what it is you want the money for??

foxy-stoat

Even if you put down you are clearing existing debt the lender will still assess your affordability on the total debt as if you didnt pay off the other credit.

Bermonia

Afraid I have to disagree with foxy-stoat there, if you advise the lender that you are consolidating those debts then their repayments should not be included in your affordability check as the agreement is that you will clear those and no longer have that financial commitment moving forwards.

foxy-stoat

If you owe £15K and ask for a £15K loan, they will assess your affordability on £30K debt - unless they are paying the other debt off directly there is no guarantee that the punter will pay the other debts off.

Alexd52

Bermonia wrote: »

Afraid I have to disagree with foxy-stoat there, if you advise the lender that you are consolidating those debts then their repayments should not be included in your affordability check as the agreement is that you will clear those and no longer have that financial commitment moving forwards.

Agree with foxy stoat here, even though the credit card debts may be paid off, they are still available for racking up further debt agai. Also, the lender doesn't know for definite that the credit card debts will indeed be paid off.

Bermonia

Will have to agree to disagree with both of you there, having worked for a number of high street banks over the past 2 decades dealing predominantly with personal lending, they would not include commitments for any debts which were confirmed to be cleared off as part of the new lending. This may of course vary with different lenders but this was certainly standard in the some of the main higher street banks.