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Switching Loans

I want to switch my current bank loan to a more competitive one.  On the application form, do I select 'debt consolidation' as the loan purpose even though I am only replacing one 'debt' for another, or should I be selecting a different loan purpose on the application form?  Also, do I include the current loan repayment amount in my current monthly 'outgoings' section of the application form? I am concerned that lenders will assume that I want an additional loan.  I only want a replacement cheaper loan.  I can't find any assistance on-line about this.  Many Thanks

Comments

  • [Deleted User]
    [Deleted User] Posts: 35,242 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    edited 7 December 2020 at 5:07PM
    Debt consolidation.

    You need to put your current outgoings as lenders will know you may not pay off the first loan and assess you on having both loans.
  • DCFC79
    DCFC79 Posts: 40,611 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    edited 7 December 2020 at 8:09PM
    Didds246 said:
    I want to switch my current bank loan to a more competitive one.  On the application form, do I select 'debt consolidation' as the loan purpose even though I am only replacing one 'debt' for another, or should I be selecting a different loan purpose on the application form?  Also, do I include the current loan repayment amount in my current monthly 'outgoings' section of the application form? I am concerned that lenders will assume that I want an additional loan.  I only want a replacement cheaper loan.  I can't find any assistance on-line about this.  Many Thanks
    So you basically have Loan A and want to apply for a second Loan to pay off A ?
    Is that right ?
    Yes the lender will base the rate offered on consolidation as the reason for the loan, they may well decline you as you currently have some debt and your applying for more.

    You have to be honest with what reason you choose.
  • sourcrates
    sourcrates Posts: 30,570 Ambassador
    Part of the Furniture 10,000 Posts I've been Money Tipped! Name Dropper
    Are you certain this is a good idea ?
    Lending criteria has tightened up significantly this year, its unlikely you will get a competitive interest rate or even an acceptance.
    Do you have other debts ?
    I’m a Forum Ambassador and I support the Forum Team on the Debt free wannabe, Credit file and ratings, and Bankruptcy and living with it boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.For free non-judgemental debt advice, contact either Stepchange, National Debtline, or CitizensAdviceBureaux.Link to SOA Calculator- https://www.stoozing.com/soa.php The "provit letter" is here-https://forums.moneysavingexpert.com/discussion/2607247/letter-when-you-know-nothing-about-about-the-debt-aka-prove-it-letter
  • Many thanks for your advice. It was an idea to replace a more expensive loan with a cheaper one which makes financial sense but there are very few offers around at the top rates.  Regarding the loan purpose, the listed purposes didn't really fit with what I was trying to do and I do not want to state a false purpose.  The comment that I may not pay off the old loan is a good one - however, I would be happy for the new lender to pay the old loan off directly, but I don't know if this is an option when applying.  My instinct is to sit tight with my existing loan for the time being.  Thanks again.
  •  I would be happy for the new lender to pay the old loan off directly, 

    This used to be quite common, but I'm not sure that any lenders do it these days. You would need to ask the potential lender.
  • sourcrates
    sourcrates Posts: 30,570 Ambassador
    Part of the Furniture 10,000 Posts I've been Money Tipped! Name Dropper
    edited 13 December 2020 at 5:49PM
    Didds246 said:
    Many thanks for your advice. It was an idea to replace a more expensive loan with a cheaper one which makes financial sense but there are very few offers around at the top rates.  Regarding the loan purpose, the listed purposes didn't really fit with what I was trying to do and I do not want to state a false purpose.  The comment that I may not pay off the old loan is a good one - however, I would be happy for the new lender to pay the old loan off directly, but I don't know if this is an option when applying.  My instinct is to sit tight with my existing loan for the time being.  Thanks again.

    Its consolodation, and many lenders are removing that option from there list of approved reasons to borrow.
    They assume you are in financial trouble and may not be able to pay further down the line.
    I’m a Forum Ambassador and I support the Forum Team on the Debt free wannabe, Credit file and ratings, and Bankruptcy and living with it boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.For free non-judgemental debt advice, contact either Stepchange, National Debtline, or CitizensAdviceBureaux.Link to SOA Calculator- https://www.stoozing.com/soa.php The "provit letter" is here-https://forums.moneysavingexpert.com/discussion/2607247/letter-when-you-know-nothing-about-about-the-debt-aka-prove-it-letter
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