Loan & impact.....

spendingneedstostop

Hi all. I hope you’re keeping well. 

In March I’d been contacted by the bank as I had two large overdrafts (both £1600) alongside a monzo OD of £400. I had these for a few years. I was moving around as a nanny and although I was earning a decent wage I stupidly just lived in the OD’s. Due to the new OD changes, My bank offered me a personal loan to clear all debt for around £3800 .. i’m paying £214.00 a month with interest it’ll be like £5200 paid over 24 months.. I think the interest was quite high but I felt a weight lifted off my shoulders knowing the monthly repayments were manageable. 

My question now is can I pay off bits at a time on top of the £214 a month or will it negatively impact my credit score? Or anything else mortgage lenders may look at? 

My boyfriend & I will one day want to buy a place but i’m worried if I pay more off it may impact it after reading various threads. 

Thanks to anyone who can share their experience of doing it / waiting! 

 

spendingneedstostop

I forgot to add.. it’s £214 each month which INCLUDES the interest.

DrEskimo

No, pay off as much as you can as fast as you can. The sooner the pay it off, the more interest you save.

spendingneedstostop

DrEskimo said:

No, pay off as much as you can as fast as you can. The sooner the pay it off, the more interest you save.

Do you have any idea on the impact of the score? I’m happy to pay more off but I’m so worried im jeopardising my chances when we look to get a good mortgage rate by doing so after reading the posts on here. Thanks so much for your time!  

MalMonroe

Any chance you could negotiate a lower interest rate? That's a lot of money you're paying out! If I were you I wouldn't worry about jeopardising future opportunities for mortgages. Just as DrEskimo said, pay off as much as you can as fast as you can. That will hopefully reduce the interest you're paying (unless there's a clause saying early repayment will mean you have to pay even more, check the small print on your loan agreement). Paying off more and paying sooner will only look good to future lenders. Things that will jeopardise future loans/mortgages include missed payments, no payments, too many loans, too many credit applications and things like that. Lenders are looking for evidence of sensible lending and repaying. And as most people on here will tell you, credit scores don't mean much to lenders. As I said, evidence of good money management is more important than your credit score. Also keep an eye on your credit reports, Equifax, Experian, etc. Make sure your details are correct too. Nothing worse than an incorrect credit report!

MinuteNoodles

spendingneedstostop said:

Do you have any idea on the impact of the score? I’m happy to pay more off but I’m so worried im jeopardising my chances when we look to get a good mortgage rate by doing so after reading the posts on here. Thanks so much for your time!  

No lender uses the scores the CRAs generate and it is daft beyond belief to pay interest on a debt just to maintain a score which is completely and utterly irrelevant. The mortgage company will view your debt level much more negatively than the CRA score, something which they cannot even see. Whatever debt you have when you apply for a mortgage can affect how much they'll lend.

ARH_2

It's great that you have your debt under control and a plan for getting back into the black. 

That's quite some interest rate you're paying - the numbers above suggest something like 30%. 

Point 1: Minimising the interest you pay on this expensive debt trumps any impact on your credit file, which could be positive, negative or totally neutral -  nobody really knows which. Assuming there aren't huge overpayment or early repayment charges, overpay as much is affordable in order to get yourself free from this. 

Point 2: Echoing others, have you looked into cheaper forms of debt that you might move this to? Paying less interest will allow you to pay down the debt fast. A personal loan with the same or another provider is one option, but there are others too. 

Grumpy_chap

Pay the loan down as quickly as you can so that the total cost is as low as it can be.
Don't worry about impact on credit score.  You are more appealing to a lender if you have no other debts and proven you can repay the larger sum.

spendingneedstostop

Grumpy_chap said:

Pay the loan down as quickly as you can so that the total cost is as low as it can be.
Don't worry about impact on credit score.  You are more appealing to a lender if you have no other debts and proven you can repay the larger sum.

ARH_2 said:

It's great that you have your debt under control and a plan for getting back into the black. 

That's quite some interest rate you're paying - the numbers above suggest something like 30%. 

Point 1: Minimising the interest you pay on this expensive debt trumps any impact on your credit file, which could be positive, negative or totally neutral -  nobody really knows which. Assuming there aren't huge overpayment or early repayment charges, overpay as much is affordable in order to get yourself free from this. 

Point 2: Echoing others, have you looked into cheaper forms of debt that you might move this to? Paying less interest will allow you to pay down the debt fast. A personal loan with the same or another provider is one option, but there are others too. 

Thanks all! I’m really really appreciative of you taking the time to respond to me. 

It’s 25.9% I believe - in honesty he told me the figures etc and in desperation and being a bit naïve I just went with it. I think there is a clause which says if I pay it off early I have 58 days interest to pay on top which I would imagine would be about £150 ish..it also says I have a 1 year minimum or 7 year maximum repayment period?? So presumably I can’t pay it all off in full until March 2021?

 I would rather get rid of it than keep it. 

My current scores are : 405 out of 700 on Clear Score & 866 out of 999 on Experian. I only have this debt to pay off now & the current balance is showing £3749 (due to interest it’s going up although i’m still making the same £214 payment each month). 

Thanks again! 

spendingneedstostop

MinuteNoodles said:

spendingneedstostop said:

Do you have any idea on the impact of the score? I’m happy to pay more off but I’m so worried im jeopardising my chances when we look to get a good mortgage rate by doing so after reading the posts on here. Thanks so much for your time!  

No lender uses the scores the CRAs generate and it is daft beyond belief to pay interest on a debt just to maintain a score which is completely and utterly irrelevant. The mortgage company will view your debt level much more negatively than the CRA score, something which they cannot even see. Whatever debt you have when you apply for a mortgage can affect how much they'll lend.

Thank you v much! I have popped a lengthy reply on my post  

spendingneedstostop

MalMonroe said:

Any chance you could negotiate a lower interest rate? That's a lot of money you're paying out! If I were you I wouldn't worry about jeopardising future opportunities for mortgages. Just as DrEskimo said, pay off as much as you can as fast as you can. That will hopefully reduce the interest you're paying (unless there's a clause saying early repayment will mean you have to pay even more, check the small print on your loan agreement). Paying off more and paying sooner will only look good to future lenders. Things that will jeopardise future loans/mortgages include missed payments, no payments, too many loans, too many credit applications and things like that. Lenders are looking for evidence of sensible lending and repaying. And as most people on here will tell you, credit scores don't mean much to lenders. As I said, evidence of good money management is more important than your credit score. Also keep an eye on your credit reports, Equifax, Experian, etc. Make sure your details are correct too. Nothing worse than an incorrect credit report!

Thank you so much for this - it’s helpful as i’ve just reviewed my scores and found one has gone up since I checked last which is a positive! 

I have wrote a lengthy reply to others on my post if you wanted to see thank you x