To loan or not to loan! 18 May 2021 at 2:35AM in Loans 12 replies 951 views

JK25

I am the world's worst saver and I need to repay a friend some money, plus have a wedding and home improvements to do.  I would never take out a loan that was unnecessary or unaffordable but If I look at taking a loan out (over 5 years) to just repay my friend the rates available to me are 18%apr and more but if I look at taking a higher loan over 7 years it drops to between 8/10%apr! 
Why is that? 
I have also worked hard to get my credit rating back up to excellent and yet I still get rubbish rates! 
Any advice would be greatly received.

Nebulous2

These are high rates.

Give us a clue on amount and how that relates to income. Is this a personal loan?

Under £7500 on a personal loan is usually more expensive. Rates are cheaper at £7500 to £15k. 

Ebe_Scrooge

JK25 said:
I have also worked hard to get my credit rating back up to excellent and yet I still get rubbish rates! 

Yet again, proof that your "rating" as defined by the CRAs is a load of codswallop.

The high rates you've been quoted are quite likely to be because you're looking to borrow (or already owe) a high sum in relation to your income.  It's worth checking all 3 credit files to make sure there's nothing amiss, but I would hazard a guess that it's simply affordability.

I would also question the wisdom of taking out a loan for a wedding.  Spending the first few years of married life in debt, just for the sake of a big party?  Save up, or have a more modest ceremony, there really is no need to be spending thousands on a wedding.  Likewise with the home improvements - are they absolutely essential, or can you do things bit by bit as and when you've saved up the money?  If you did take out a loan, that's money every month that you'd HAVE to be repaying.  If you can afford the repayments, why haven't you been saving a similar amount every month for the past couple of years?  Particularly for the wedding, which I assume has been planned for some time.

Sandtree

Ebe_Scrooge said:

The high rates you've been quoted are quite likely to be because you're looking to borrow (or already owe) a high sum in relation to your income. 

I'm not sure that comment helps the OP to understand if they borrow more why they get a lower rate as clearly a higher loan is going to be a higher percentage of their income.

MEM62

JK25 said:

I am the world's worst saver and I need to repay a friend some money, plus have a wedding and home improvements to do. 

JK25 said:

I would never take out a loan that was unnecessary or unaffordable

Taking out a loan because you do not have the self discipline to save is about as unnecessary as it gets.  And taking out a loan for a wedding is venturing into madness.     

NewLeaf1986

JK25 said:

I am the world's worst saver and I need to repay a friend some money, plus have a wedding and home improvements to do.  I would never take out a loan that was unnecessary or unaffordable but If I look at taking a loan out (over 5 years) to just repay my friend the rates available to me are 18%apr and more but if I look at taking a higher loan over 7 years it drops to between 8/10%apr! 
Why is that? 
I have also worked hard to get my credit rating back up to excellent and yet I still get rubbish rates! 
Any advice would be greatly received.

You need to break this cycle my friend.

Don't take out a loan.
Don't take out a credit card.
Repay your friend what you can reasonably afford to out of your benefits / wages / salary each time you are paid until you have cleared your debt to them.
Then start saving for your wedding. Plan your budget. Plan your wedding realistically.
If you want more money, earn more.
Take a second job, do evening classes to increase your worth and apply for better jobs, whatever it takes. 

Grumpy_chap

The OP is considering borrowing to pay for their wedding plus improvements to, presumably, the intended marital home.  This type of finance discussion would be better with the OP's intended betrothed than a group of internet strangers.  Starting out married life with ghosts hidden in the financial closet does not bode well.

enthusiasticsaver

JK25 said:

I am the world's worst saver and I need to repay a friend some money, plus have a wedding and home improvements to do.  I would never take out a loan that was unnecessary or unaffordable but If I look at taking a loan out (over 5 years) to just repay my friend the rates available to me are 18%apr and more but if I look at taking a higher loan over 7 years it drops to between 8/10%apr! 
Why is that? 
I have also worked hard to get my credit rating back up to excellent and yet I still get rubbish rates! 
Any advice would be greatly received.

If you already struggle to save and have taken a while to repay your friend then you need to totally rethink your attitude to finances and prioritise your expenditure. Borrowing that amount of money is not advisable. Talk to your partner and set up a savings plan for the wedding, repay your friend then save for home improvements. You will thank yourself in the long run rather than being saddled with a large monthly repayment on a high interest loan. 

FaceHead

The OP may not come back to this thread because some of the comments are absolutely brutal. They are, however, both true and probably well meaning. 

OP - you can usually (check the T's & C's) pay a loan back faster, so if borrowing more (e.g. over the 7.5k threshold mentioned) for more time gets a lower rate, do that and then pay it back, rather than suffering a higher interest rate. However, not borrowing will see you pay even less interest.   There are also 0% credit cards, which if used well can be a good option. 

NewLeaf1986

FaceHead said:

The OP may not come back to this thread because some of the comments are absolutely brutal. They are, however, both true and probably well meaning. 

OP - you can usually (check the T's & C's) pay a loan back faster, so if borrowing more (e.g. over the 7.5k threshold mentioned) for more time gets a lower rate, do that and then pay it back, rather than suffering a higher interest rate. However, not borrowing will see you pay even less interest.   There are also 0% credit cards, which if used well can be a good option. 

OK, point taken. I'll happily offer a different tack:

OP - have you looked at an MBNA credit card? These provide 0% money transfers into your current account. They'll tell you how much they're willing to lend at pre-application stage on their website. This is the kind of card FaceHead is referring to. 

JK25

FaceHead said:

The OP may not come back to this thread because some of the comments are absolutely brutal. They are, however, both true and probably well meaning. 

OP - you can usually (check the T's & C's) pay a loan back faster, so if borrowing more (e.g. over the 7.5k threshold mentioned) for more time gets a lower rate, do that and then pay it back, rather than suffering a higher interest rate. However, not borrowing will see you pay even less interest.   There are also 0% credit cards, which if used well can be a good option. 

You're right, some of the comments are a bit harsh but true, hence the dilemma and we don't all have the luxury of time to save for everything (which is why people get mortgages on properties and pcp on cars) Thank you for your advice, I have looked at all options, I will think long and hard on what to do.