Effects of not accepting a Loan offer

Bakerboy1977

After a full application and credit check I have been offered a personal loan by one of the major banks. Plans have just changed (contractor delays) and so I don't need the funds until 4 months from now.
Will not accepting a loan go against me when I re-apply? i.e. is there a negative effect on my credit score if I do not accept a loan that has been offered?

Ebe_Scrooge

Your score is irrelevant, ignore it.

You will have a hard search on your file from the loan application.  In itself this is no problem.  Multiple searches in a short space of time can be a red flag to lenders.

Why not just accept the loan you've been offered, stick the money in the bank for a few months, then use it to pay the contractor in 4 months?  Seems the simplest solution all round.

Bakerboy1977

Thanks for the reply. This is very helpful.
I was thinking of just banking the loan now but in 4 months I could save the equivalent of 4 months' loan payments... Which could prove very useful.

MalMonroe

Bakerboy1977 said:

Thanks for the reply. This is very helpful.
I was thinking of just banking the loan now but in 4 months I could save the equivalent of 4 months' loan payments... Which could prove very useful.

As Ebe_Scrooge says, too many hard searches will be the most damaging thing for your credit report. 

Would you be able to save the whole amount you intended to borrow instead and postpone the contractors for a little while longer? That way you'd have no repayments or interest either. Just a thought.

I have to admit to being a tad brainwashed by this site, too, especially the advice about loans -

"Remember MSE's stance on loans: 'borrow as little as possible, repay as quickly as possible'."

Bakerboy1977

MalMonroe said:

Would you be able to save the whole amount you intended to borrow instead and postpone the contractors for a little while longer? That way you'd have no repayments or interest either. Just a thought.

Thanks for the helpful reply. Unfortunately it would take several years to save up the full amount and this project can't wait that long.

To sum up... If I don't accept the current offer, and re-apply in Jan/Feb, am I correct in saying that 1 rejected loan offer will not cause a problem with the next application?

Ebe_Scrooge

Bakerboy1977 said:

MalMonroe said:

Would you be able to save the whole amount you intended to borrow instead and postpone the contractors for a little while longer? That way you'd have no repayments or interest either. Just a thought.

Thanks for the helpful reply. Unfortunately it would take several years to save up the full amount and this project can't wait that long.

To sum up... If I don't accept the current offer, and re-apply in Jan/Feb, am I correct in saying that 1 rejected loan offer will not cause a problem with the next application?

Whether you accept or reject the loan (or indeed, even if the lender refuses to lend to you after performing a credit search) makes no difference.  The search will be on your file, and visible to any other lenders.  The outcome of a search is not recorded, just the fact that a search was performed.

Multiple searches in a short space of time are bad, they give the impression that you are desperate for credit.  But two searches in the space of 4/5/6 months will not be an issue.

Bakerboy1977 said:

I was thinking of just banking the loan now but in 4 months I could save the equivalent of 4 months' loan payments... Which could prove very useful.

The other way of looking at it - if you take the loan now, even though you don't need the money immediately, you'll finish paying it off 4 months earlier than you would otherwise do.  The overall amount you'll pay won't change of course.

pjread

At risk of stating the obvious - while one search in itself is highly unlikely to affect any lenders decision to offer a loan or not, it is of course not guaranteed you'd be accepted in 3/4 months time either.  e.g. even if your situation is identical, the lender could tighten their criteria if they start to see increasing default rates and decide they want to reduce their risk.  Or they could offer still, but rates might have changed. 

It's all a bit crystal ball but if you're happy with the rate and do really 'need' it, I might be inclined to take it while it's definitely on the table.  If that 'need' is really optional I'd wait.

[Deleted User]

Bakerboy1977 said:

MalMonroe said:

Would you be able to save the whole amount you intended to borrow instead and postpone the contractors for a little while longer? That way you'd have no repayments or interest either. Just a thought.

Thanks for the helpful reply. Unfortunately it would take several years to save up the full amount and this project can't wait that long.

To sum up... If I don't accept the current offer, and re-apply in Jan/Feb, am I correct in saying that 1 rejected loan offer will not cause a problem with the next application?

As above, you risk having the loan offer be rejected next year, with the inflation rates, cost of living problems etc, the lender may not give you the same amount or the same terms, if you are going to go ahead 100% just in 4 months time then sticking the money in an easy access saver or an account that pays interest on the money you hold isn't a bad idea. An example is the Chase saver account - they pay monthly up to £250k at an AER of 1.5%

superbigal

Whatever the deal you have been offered now, it is very unlikely to be as good 4 months down the road IMO

Clive_Woody

The cost of borrowing seems to be increasing and I'm not sure I see this changing. BoE interest rates will most likely continue to go up (or at least not go back down) so you risk a higher APR if you reapply in a few months time.

If this was me, I would take the loan now, stick the money in a savings account, and start repayments now. The money is then ready when your want to start the work.

bengalknights

I would just bank the cash in 4 months time most likely it will be at a higher rate