Declined Loan -Advice needed going forward ….

rachaelsmith82

Hi,

Looking for some advice after getting declined for a loan.

I have been with my bank Lloyds for 20 yrs. I earn £22,750 a year before tax. Full time employment in same job for 12 yrs

My debts are 

Mortgage - Just got in November and my half of share is £300 ( half as live with partner)

Loan with AA - took out loan for £10,000 just before my mortgage in October - pay £210 monthly over 5 yrs

M&S Credit Card - Currently have £4500 balance on it out of a £5000 limit

I was on my Lloyds banking app and saw the pop up message to check what I could apply for. Since buying my house I have quickly used my credit card over 6 months racking up the £4500 very quickly - which I don’t normally do but as just bought house had to do some work / furniture etc. When I used the Lloyds calculator it seemed like an excellent opportunity to consolidate my debts so I am actually paying off my debts - as the credit card is always more difficult than a loan to easily pay off. It would give me more disposable cash and allow me to start saving monthly instead of ploughing money into a never ending credit card bill. 

The Lloyds loan calculator said I was “highly likely” for £16500 ( was going to pay off debts and use remaining for house works) and as I would be paying less than what I am currently paying monthly for my debt this seemed like a no brainer as I would know at end of 5 yrs my debt would be paid.  

Lloyds came back next day online and declined loan. The message said they had sent me email with reasons why and also the credit agencies they used. I did not receive email ( checked junk / spam etc) Called them and passed around 8 different people and eventually persuaded a woman to help me as no-one else could as they all said I needed a different department that didn’t seem to exist! 

Lady spoke to U/W and came back to say as I had used most of my CC in short time that played a part and when I asked her for help in how I go forward she suggested to keep paying every month, stop using CC (which I now have) and try again in few months. 

Still dont have email which is frustrating but came on MSE website to check some info. I went on their “loan eligibility” page and put my info in to see what it said and whilst most places showed 0% chance - Zopa it showed I was pre approved for amount ( at bit higher APR than lloyds) and actually just got a text saying:

Hi RXXXX

Your loan with Zopa has been accepted. You're a few clicks from it being in your account. 

Proceed:  https:

So……. Not sure what to do where to go and looking for advice / suggestions! I know applying after decline is frowned upon but unsure if this “pre approval” from MSE soft search showing zopa is worth looking into? 

I just want to get to a place where I can replace this CC with a loan ASAP so I feel like I am making headway paying off debt and also the benefit of having more disposable cash so I can actually start saving!

Thanks in advance - any thoughts are much appreciated!

[Deleted User]

You could try try another application, but your indebtedness us going to make it hard.

15k currently (plus mortgage) and wanting another 17k means a total of 32k on an income of just 23k.

If declined for this one, work at reducing your existing debt for a few months before trying again.

You also need to find out what rate your current debts are at and look for alternatives. Eg a BT card. A credit card is also easier to pay off than a loan, due to its flexibility.

Build emergency savings, but forget any significant savings until you've cleared the debt. Otherwise you're just borrowing your savings and making yourself poorer.

rachaelsmith82

Thanks, Its frustrating as assume because they can't know for sure I am going to use the loan to pay off the other debts as far as they are concerned I would have 32k debt rather than 16k!

[Deleted User]

That's exactly the case. A lot of people get a loan to consolidate, then see something new and shiny that they would prefer to spend the money on.  Consolidation loans are amongst the highest risk.

Use your disposable income to hammer down the debt, starting with the highest rate. And as above, move what you can to a lower or zero rate card.

redpete

I suspect (hope) lenders are applying stricter criteria in the light of the 'irresponsible lending' complaints.  A large amount of new borrowing (mortgage, loan, credit card) seems an obvious red light, especially the credit card debt on top of the other two - would say to me that you are living beyond your means (not intended as judgemental - just a comment on what it would look like).

sourcrates

Due to covid-19, and the uncertanty about jobs etc, many lenders have rained in there lending, with so many people affected, it would not take that much to tip the balance, and the banks would start losing money hand over fist.

Not a good time to concider applying for a loan.

Thrugelmir

rachaelsmith82 said:

Mortgage - Just got in November and my half of share is £300 ( half as live with partner)

There's no half shares. You are jointly and severally liable for the whole amount. 

MalMonroe

 Can you do a soft search to see if you'd be eligible for a 0% balance transfer credit card? Then it wouldn't be a never ending credit card bill. I'd honestly start trying to reduce the debt I already have now. Your salary isn't very high for the amount of debt you have right now. If you're declined for too many loans then lenders will be even more put off. I'd carry on trying to reduce all the debts for another six months at least. And see if I could get a 0% balance transfer, I got one and it's really reduced my outgoings and allowed me to clear the credit card debt much sooner. Borrowing more money to pay off debt is never a good idea, as I know to my cost. I ended up having to take out a Debt Relief Order. Hang on for another few months and re-assess. Tying yourself into debt for another five years is not a good plan, in my opinion anyway. I've been there. It never ends!