Hello and question about secured loan figures quoted by a broker

Kalessin

FWIW @Deleted_User and others this is the Excel formula that gets me the closest to the monthly repayment amount - =PMT(A1/12,B1*12,(C1))
Where:

• A1 = interest rate
• B1 = number of years requested/offered
• C1 = total value of loan requested plus any fees

I am getting very close to the Tesco loan calculator results (a few pounds out on the monthly, a couple of hundred on the total repayable - which is itself the monthly repayable times the number of months in the term), which I guess might relate to the difference between monthly APR in this formula and a daily APR. 

Obviously this doesn't precisely replicate a mix of fixed and variable rate as per my offer, but it's useful.  Just having my own formula makes me feel a bit more in control 

kimwp

Kalessin said:

@DrEskimo All good points.  The 20k is pretty much all one big thing, which I really would like to do this year - partly just as a reward for having made it through last year.  There's no savings scenario that gets me close in the next few years.

I've never heard of someone rewarding themselves with a debt before.

Kalessin

kimwp said:

Kalessin said:

@DrEskimo All good points.  The 20k is pretty much all one big thing, which I really would like to do this year - partly just as a reward for having made it through last year.  There's no savings scenario that gets me close in the next few years.

I've never heard of someone rewarding themselves with a debt before.

Hah! 😆 Clever point @kimwp !  But it's also the case that most of my (and many people's) financial decisions involve leveraging credit for tactical or personal reasons, or sometimes just to survive, and I've done that too.  Buying something - even a dinner - with a credit card is the same on a smaller scale, with a higher interest rate unless you are in the balance transfer game.  If you are making a moral point, or suggesting that no-one should ever go into debt for something that improves quality of life (ie. potentially a reward), that's one thing, or if you are saying there is a better way of accessing sufficient funds -. how to get from A to B - I'm all ears!  As long as it's not "you shouldn't start from here" as in the old joke 😏 ... as in the above posts, really I'm trying to weigh up all options.  Could I get the funds via 3 or 4 money transfers at 0% (20k might well work at around £200pcm at a minimum repayment rate across a few cards) , and keep switching and saving?  Should I roll this into equity release or a remortgage and do everything else as well?  As I'm realising, a good credit score, credit history and being on top of things are only part -maybe even the smaller part - of lender algorithms, and every year the window gets tighter. 🥶🥵  

kimwp

Not a moral point, but I've seen a lot of people on these boards find themselves unable to service their debt and it's caused worry and unhappiness, as well as needing to follow DMP/IVA/bankruptcy routes.
In terms of your question - pre-covid, I figured out that I could do a money transfer with Halifax with no fee, then a balance transfer at 0% to free up cash (builders etc seem to do bank transfers rather than credit cards). At the time, I had 20% of my gross salary already available in credit and when applying for a new card, got offered a further 20ish% 0% purchase card - but as noted that would be useful if paying for the materials, less useful for paying people. I think it would be difficult to get more credit the closer your available credit gets to your income and also you need to consider utilisation rates. New cards are unknowns in terms of how much you get offered and the rate, if you don't get the 20k with the first couple of cards, it's probably sensible to wait a bit before another credit check (possibly unless you do them all in one day, not sure if that works).

Kalessin

kimwp said:

Not a moral point, but I've seen a lot of people on these boards find themselves unable to service their debt and it's caused worry and unhappiness, as well as needing to follow DMP/IVA/bankruptcy routes.
In terms of your question - pre-covid, I figured out that I could do a money transfer with Halifax with no fee, then a balance transfer at 0% to free up cash (builders etc seem to do bank transfers rather than credit cards). At the time, I had 20% of my gross salary already available in credit and when applying for a new card, got offered a further 20ish% 0% purchase card - but as noted that would be useful if paying for the materials, less useful for paying people. I think it would be difficult to get more credit the closer your available credit gets to your income and also you need to consider utilisation rates. New cards are unknowns in terms of how much you get offered and the rate, if you don't get the 20k with the first couple of cards, it's probably sensible to wait a bit before another credit check (possibly unless you do them all in one day, not sure if that works).

Thanks @kimwp definitely some food for thought!  🎈 If I go for a 'credit spread' across multiple cards or vehicles I will make the applications in the same day (other than equity release).  All looks good in theory unless the balance transfer market changes or your own circumstances mean less offers on the table. 

Yes, utilisation and salary proportions are one specific way the algorithms impact borrowers: it means those with less need for credit or less active use get preferential rates, which obviously looks like a lower risk for a lender.  All part of that 'Matthew Principle' for those who like that sort of thing. 

For me I have managed well with credit and salary, so I have this very high score, low credit card usage and good mortgage LTV,  and never missed anything, but always somewhat close to the edge in terms of cashflow.  I'm finding out that is not a great place to start credit applications from, as my age creeps up toward retirement, hence trying to model all the options I do currently have.  Utilisation is possibly low enough to get me to 20k on 0% money transfer cards (even with the fees) but the 12-year deal I outlined initially might allow me to keep those options open for short-term needs. 

My equity release model might work if I assume continued house price inflation in my area as per the last 20 years, in effect that outstrips the capital debt in 10-12 years so I would mainly need to manage the interest to "break even".  None of these is a good substitute for a big suitcase of gold, high-perfoming stock options or a lottery win, but all much more possible. 😅🤷‍♀️

DrEskimo

Kalessin said:

kimwp said:

Not a moral point, but I've seen a lot of people on these boards find themselves unable to service their debt and it's caused worry and unhappiness, as well as needing to follow DMP/IVA/bankruptcy routes.
In terms of your question - pre-covid, I figured out that I could do a money transfer with Halifax with no fee, then a balance transfer at 0% to free up cash (builders etc seem to do bank transfers rather than credit cards). At the time, I had 20% of my gross salary already available in credit and when applying for a new card, got offered a further 20ish% 0% purchase card - but as noted that would be useful if paying for the materials, less useful for paying people. I think it would be difficult to get more credit the closer your available credit gets to your income and also you need to consider utilisation rates. New cards are unknowns in terms of how much you get offered and the rate, if you don't get the 20k with the first couple of cards, it's probably sensible to wait a bit before another credit check (possibly unless you do them all in one day, not sure if that works).

Yes, utilisation and salary proportions are one specific way the algorithms impact borrowers: it means those with less need for credit or less active use get preferential rates, which obviously looks like a lower risk for a lender.  All part of that 'Matthew Principle' for those who like that sort of thing. 

People with money don't continue to accumulate wealth because they have access to cheap credit.

Quite the opposite, using credit reduces wealth.

kimwp

DrEskimo said:

Kalessin said:

kimwp said:

Not a moral point, but I've seen a lot of people on these boards find themselves unable to service their debt and it's caused worry and unhappiness, as well as needing to follow DMP/IVA/bankruptcy routes.
In terms of your question - pre-covid, I figured out that I could do a money transfer with Halifax with no fee, then a balance transfer at 0% to free up cash (builders etc seem to do bank transfers rather than credit cards). At the time, I had 20% of my gross salary already available in credit and when applying for a new card, got offered a further 20ish% 0% purchase card - but as noted that would be useful if paying for the materials, less useful for paying people. I think it would be difficult to get more credit the closer your available credit gets to your income and also you need to consider utilisation rates. New cards are unknowns in terms of how much you get offered and the rate, if you don't get the 20k with the first couple of cards, it's probably sensible to wait a bit before another credit check (possibly unless you do them all in one day, not sure if that works).

Yes, utilisation and salary proportions are one specific way the algorithms impact borrowers: it means those with less need for credit or less active use get preferential rates, which obviously looks like a lower risk for a lender.  All part of that 'Matthew Principle' for those who like that sort of thing. 

People with money don't continue to accumulate wealth because they have access to cheap credit.

Quite the opposite, using credit reduces wealth.

Well... Leveraging credit can result in greater wealth, for example mortgaging buy to lets, stoozing, even buy now pay later on 0%. But it involves risk as you are then financially vulnerable to changes of circumstances that mean you are unable to satisfy your debt obligations. 

Kalessin

DrEskimo said:

People with money don't continue to accumulate wealth because they have access to cheap credit. Quite the opposite, using credit reduces wealth.

Thanks @DrEskimo - I feel actually you are making my point 😉.  "With money" is all relative anyway.  And while my point wasn't specifically about preferential rates, in fact higher disposable income or assets do tend to give you the chance to leverage those benefits too.  And theoretically someone who has assets or cash may not "need" to borrow on credit, they could just use their reserves, but actually borrowing against those assets can be an optimal strategy in more than one circumstance, no?  But that's all a different and interesting discussion unless you are making a helpful point about my options, in which case please do clarify, I appreciate the help and advice!

Kalessin

kimwp said:

Well... Leveraging credit can result in greater wealth, for example mortgaging buy to lets, stoozing, even buy now pay later on 0%. But it involves risk as you are then financially vulnerable to changes of circumstances that mean you are unable to satisfy your debt obligations. 

Thanks @kimwp there is that balance between liquid assets, bricks and mortar etc. serviceable debt, and indeed investments.  How it relates to me is that I have managed well on steady cashflow but without being able to build cash reserves (everyone has a story 😅).  So in order to do anything I need to borrow, and my credit history shows I have always coped.  However, the algorithm assesses future risk and margins, and no doubt uses trend statistical measures, which are working against me at the moment and won't get any better as I get older.  But you mentioned the balance transfers and I'm now actively modelling that option!

Sncjw

What is it exactly that needs doing? If it's over due for many years why can't you wait longer and do it in stages.

I wouldn't want to pay an extra 10k on something that may also go over budget. Often renovations cost more than you think.