Pre-approved loan for consolidation

ukfff54321

Been looking for a loan to pay off my credit card (approx 11k) which mounted up buying bits for my house renovation. I currently have a small personal loan with Zopa which I am looking to increase by 18k over 5 years which will clear my credit card and the remainder of my car HP agreement. The monthly repayments are the same as just my car HP alone so as I am clearing this, the affordability is good.

I currently have another credit card which I am paying off as it’s on a 0% deal so will leave that where it is.

The main reason for going for this consolidation loan is to clear the credit card I am paying close to £180 a month interest on.

Anyway, my main question is when I am marked as pre-approved by the lender (Zopa in this case) with a guaranteed APR and I currently have a loan with them, is this pre-approval true in the sense of approved or does is mean nothing?

I have never been refused credit but my main concern is being refused as I seem to recall a common question on credit applications being “have you ever been refused credit”. That suggests to me that if my application is in fact refused - I will need to answer yes to that forever more!

The reason for going with Zopa is the pre-approval but I also have Tesco as an option with 95% chance of approval but a much lower APR.

Not sure which way to go. 

MorningcoffeeIV

It will always be subject to final checks. Affordability may be a problem, as the lender will consider it added to your current debt  

It''s very rare to be asked if you've ever been declined credit.

But before you take out yet further debt, go to the DFW boards for a more holistic solution to your debt problems.

MalMonroe

Hi, in my experience, the trouble with pre-approved loans and credit cards is that you just never know. Pre-approval is not a guarantee and it should say that on the appropriate website. You can think you will be accepted because the feedback is great but when you apply, you can be declined and then that's a hard search on your credit report that served no purpose.

A few years ago I applied for a credit card with Capital One just because they said I was 100% pre-approved and they actually sent me a welcome letter and a credit card agreement by email (it didn't say draft, it said 'credit agreement' on it) and so I thought it was a done deal. The next email I received said I wouldn't be getting a credit card as my application had been declined. 

I wasn't very pleased (I'd also had a credit card with them in the past and managed it responsibly so I didn't really understand the rejection) and complained to the Financial Ombudsman because Cap One had led me up the garden path, done a hard search, sent me an actual, formal, signed and dated credit agreement and then turned me down. The Ombudsman told them to remove the hard search from my credit report and to ensure that they didn't mislead prospective customers in the future. Whether they continue to mislead people or not, I don't know. But I don't think they'll care one way or the other, as they are an international concern. A couple of months later I applied to Virgin and was accepted. Capital One actually did me a favour because Virgin is a better cc. For me, anyway.

I know you want a loan but it's a similar procedure. 

However, the general advice on here is to try not to borrow to pay off money that's already been borrowed. If you can avoid it.

You said "I currently have a small personal loan with Zopa which I am looking to increase by 18k over 5 years which will clear my credit card and the remainder of my car HP agreement" - but that's five years of repayments and what interest would you be paying on that kind of loan?  How small is the loan you have already?

I agree with MorningcoffeeIV about having a look at the DFW boards. Before you take any action, you could also do worse than contact one of the free debt help agencies - StepChange, National Debtline and Citizens Advice, just to see if they can offer any advice. Prepare a Statement of Account before you do, so they can get a clear picture of all your incomings and outgoings. I have to say that when I was in terrible debt, I turned to StepChange and they helped me so much. 

I wish you all the best. I've recounted my own experiences and thoughts - I hope they'll give you a bit of food for thought. Take care.

ukfff54321

Thank you @MalMonroe, interestingly I did an eligibility check on Virgin and it comes back with this statement:

You're pre-approved!

Great news! If you apply for one of our credit cards you will be accepted.

Why not apply now? We've already got your details, so we'll make it quick and easy. Please remember, for your result to stay the same, you should:

• Apply on the same day
• Provide the same information you entered on Card Checker
• Pass our standard identity checks (they won't affect your credit rating)

That reads to me as if the approval is guaranteed and my credit rating will not be affected (although I know of course that it will be). Just goes to show as you said.

I think a balance transfer card at 0% is probably the way to go for me as my main objective is to clear the 11.5K avoiding the £180 a month in interest alone. Consolidating the £6800 from my car HP was just a bonus.

sourcrates

That word, "Consolidation" springs up a lot on these forums, its usually the first option people turn too when they can no longer afford their high interest borrowing.

Instead of looking at sensible debt solutions, they assume they can borrow their way out of debt, well, those who do this, often do so more than once, sometimes twice, three times or more is quite common.

They tend to get stuck in the borrow/repay mindset, and very often it fails, it fails because they don`t address the reasons why they got into debt in the first place, old habits die hard as they say, over spending and bad budgeting are all common reasons why consolidation fails.

For it to work you must be super savvy with your money, no further borrowing, close down those consolidated lines of credit, learn to live within your means, it requires you to be aware of where your money is going, and what you are spending it on, most can`t hack it, and before long those consolidated credit cards are all maxed out again, and there you are, back at square one, but with twice the debt you had previously, it can be a very vicious circle sometimes.

As I said above, this mistake gets repeated numerous times, always with the same result, until the OP has their "lightbulb moment" realises further borrowing is futile, and contacts a debt charity for proper help.

Only then is the cycle broken, I wish you good luck with it all.

ukfff54321

Thank you @sourcrates

I don’t consider myself to have unmanageable debt. I have two cars both of which have under 30% of their value on finance. I put a considerable sum (not maxed out) on my credit card in attempt to fast track my house renovation that like most projects of this nature run over time and over budget. Yes not ideal and not the smartest of moves but a small price to pay for the mental pain it was causing having the basics unfinished.

I am considering “consolidation” purely to reduce the interest I am paying on the credit card, but I didn’t want to do so at the expense of running the risk of being refused credit and impacting my credit score. I am not clear on what the impact is of being refused credit as I have never been in this position before, which was part of my query.

Anyway the purpose of seeking advice was if it was worth the risk/effort of applying for more credit or a 0% balance transfer card to reduce the interest on my credit card and/or remaining 7K car HP agreement. The purpose is not to increase my borrowing rather to pay it off sooner.

Thanks

CliveOfIndia

ukfff54321 said:

 but I didn’t want to do so at the expense of running the risk of being refused credit and impacting my credit score. I am not clear on what the impact is of being refused credit as I have never been in this position before, which was part of my query.

Ignore your score as it's not seen by anyone except you and the CRA.

If you apply for credit and get declined it will make almost no difference to your credit history.  Lenders will see that a search has been performed, but they won't know the outcome.  The only time it becomes an issue is if you have a large amount of searches in a short space of time - the implication being that you are desperate for credit.  And it's possible they may infer that you keep being refused, simply because you've made so many applications.  But the actual result of a search (whether you're accepted or declined) is not recorded.

ukfff54321 said:

I seem to recall a common question on credit applications being “have you ever been refused credit”.

I've never seen this.  Certainly on car insurance they always ask "have you ever had insurance refused or cancelled", but I've never seen it on a credit application.

sourcrates

ukfff54321 said:

Thank you @sourcrates

I don’t consider myself to have unmanageable debt. I have two cars both of which have under 30% of their value on finance. I put a considerable sum (not maxed out) on my credit card in attempt to fast track my house renovation that like most projects of this nature run over time and over budget. Yes not ideal and not the smartest of moves but a small price to pay for the mental pain it was causing having the basics unfinished.

I am considering “consolidation” purely to reduce the interest I am paying on the credit card, but I didn’t want to do so at the expense of running the risk of being refused credit and impacting my credit score. I am not clear on what the impact is of being refused credit as I have never been in this position before, which was part of my query.

Anyway the purpose of seeking advice was if it was worth the risk/effort of applying for more credit or a 0% balance transfer card to reduce the interest on my credit card and/or remaining 7K car HP agreement. The purpose is not to increase my borrowing rather to pay it off sooner.

Thanks

Yes, that is everyone's initial intention with consolidation, but then temptation gets the better of you, and the rest we all know about.

If you can be super strict with yourself then it can work, and it may work for you, but for the majority it doesn't.

Its not something we generally recommend you do on MSE.

ukfff54321

CliveOfIndia said:

ukfff54321 said:

 but I didn’t want to do so at the expense of running the risk of being refused credit and impacting my credit score. I am not clear on what the impact is of being refused credit as I have never been in this position before, which was part of my query.

Ignore your score as it's not seen by anyone except you and the CRA.

If you apply for credit and get declined it will make almost no difference to your credit history.  Lenders will see that a search has been performed, but they won't know the outcome.  The only time it becomes an issue is if you have a large amount of searches in a short space of time - the implication being that you are desperate for credit.  And it's possible they may infer that you keep being refused, simply because you've made so many applications.  But the actual result of a search (whether you're accepted or declined) is not recorded.

ukfff54321 said:

I seem to recall a common question on credit applications being “have you ever been refused credit”.

I've never seen this.  Certainly on car insurance they always ask "have you ever had insurance refused or cancelled", but I've never seen it on a credit application.

You know what, I think I am getting confused with insurance!!

born_again

ukfff54321 said: did an eligibility check on Virgin and it comes back with this statement:

You're pre-approved!

Great news! If you apply for one of our credit cards you will be accepted.

Why not apply now? We've already got your details, so we'll make it quick and easy. Please remember, for your result to stay the same, you should:

• Apply on the same day
• Provide the same information you entered on Card Checker
• Pass our standard identity checks (they won't affect your credit rating)

That reads to me as if the approval is guaranteed and my credit rating will not be affected (although I know of course that it will be). Just goes to show as you said.

I think a balance transfer card at 0% is probably the way to go for me as my main objective is to clear the 11.5K avoiding the £180 a month in interest alone. Consolidating the £6800 from my car HP was just a bonus.

Please, Do not think they will give you £11.5K straight off the bat, especially given your other debts. But they may only give you a low amount.

In the main lenders look at you income compared to your available debt. As well as their risk appetite at that point.

If you did get the amount. Then make sure you close the old card down, so as not to be tempted to use it & end up even worse off.

ukfff54321

sourcrates said:

ukfff54321 said:

Thank you @sourcrates

I don’t consider myself to have unmanageable debt. I have two cars both of which have under 30% of their value on finance. I put a considerable sum (not maxed out) on my credit card in attempt to fast track my house renovation that like most projects of this nature run over time and over budget. Yes not ideal and not the smartest of moves but a small price to pay for the mental pain it was causing having the basics unfinished.

I am considering “consolidation” purely to reduce the interest I am paying on the credit card, but I didn’t want to do so at the expense of running the risk of being refused credit and impacting my credit score. I am not clear on what the impact is of being refused credit as I have never been in this position before, which was part of my query.

Anyway the purpose of seeking advice was if it was worth the risk/effort of applying for more credit or a 0% balance transfer card to reduce the interest on my credit card and/or remaining 7K car HP agreement. The purpose is not to increase my borrowing rather to pay it off sooner.

Thanks

Yes, that is everyone's initial intention with consolidation, but then temptation gets the better of you, and the rest we all know about.

If you can be super strict with yourself then it can work, and it may work for you, but for the majority it doesn't.

It’s not something we generally recommend you do on MSE.

I get where you are coming from but surely that is talking about self-control and not being able to resist temptation; why would that make consolidation a bad thing?

Just trying to understand why anyone would not move existing credit to something on a lower or zero interest based on it causing potential temptation?

I understand that consolidation for the purpose of extending the loan period due to struggling with the monthly payments is a bad thing and simply kicking the can down the road in a vicious cycle. But doing this with the sole purpose to pay less interest and therefore pay off the debt more effectively?

Moving credit card balances to personal loans and leaving that card active leaves one open to temptation, I agree but again surely that’s not a good reason to discourage doing so based on an assumption that because someone is not debt free that they will behave in a certain way? Surely there are other ways to repay debts more effectively and reduce temptation such as consolidate and cancel the card?

Just my opinion (and I can only speak based on my own situation) but I disagree that I should be paying more interest based on an incorrect assumption that I (or any others in a similar situation) lack a element self-control.