Switching Car Finance to Personal Loan

lpool18

Hi. I'm looking at switching my car HP finance to a personal loan to take advantage of better interest rates. HP is currently 10.9% apr. I got 2 questions really...should I make the application for the PL as a debt consolidation loan or just a straight personal loan? Also, part of the PL application asks for outgoings. As I am going to be clearing the HP, do I still need to list the monthly repayment amount for that as part of my out goings as if I do, it might look like I'm taking on too much debt when in fact (if I'm accepted) the monthly repayment on the PL will be less than what I'm currently paying for the HP. Thanks 

CliveOfIndia

It's a very fair question.  First off, be aware that you won't necessarily be offered the advertised "representative" APR on a personal loan, you won't know what rate you'll actually be offered until your application is completed and accepted.

That aside, the tricky problem of consolidation loans.  The issue is that the lender cannot guarantee that you'll actually use the new loan to repay the existing debt.  I know that is your intention, but they can't force you to use it for that purpose.  So they have to take the view that any new loan would be in addition to - not instead of - your existing debt.

If it were me, I think I might be tempted to go old-school and phone them up to ask.  By the strict letter of the law, you really should put the purpose as "Consolidation" and include the HP payments in your declared outgoings.  And if they want to, they can see your HP agreement on your credit report, so they may suspect something a bit dodgy if you don't include the HP payments.  Maybe, perhaps, if you phone them up, they may be able to offer you a better alternative than a straightforward consolidation loan?

lpool18

CliveOfIndia said:

It's a very fair question.  First off, be aware that you won't necessarily be offered the advertised "representative" APR on a personal loan, you won't know what rate you'll actually be offered until your application is completed and accepted.

That aside, the tricky problem of consolidation loans.  The issue is that the lender cannot guarantee that you'll actually use the new loan to repay the existing debt.  I know that is your intention, but they can't force you to use it for that purpose.  So they have to take the view that any new loan would be in addition to - not instead of - your existing debt.

If it were me, I think I might be tempted to go old-school and phone them up to ask.  By the strict letter of the law, you really should put the purpose as "Consolidation" and include the HP payments in your declared outgoings.  And if they want to, they can see your HP agreement on your credit report, so they may suspect something a bit dodgy if you don't include the HP payments.  Maybe, perhaps, if you phone them up, they may be able to offer you a better alternative than a straightforward consolidation loan?

Thank you. Yes I'm just on hold with my bank at the moment to ask the question so thought I'd ask here too. Was just thinking it might be quicker to get an answer here