Switching Loan to a cheaper rate.

grant89uk

Dunno if its possible so looking for advice. 

Currently got a loan but the rate is poor (13.1%). Was looking at how much I would save by switching to another provider, currently 6.2% for >£7500 and 7.3% for < £7500.

My credit rating is pretty good and I normally get the good APR when applying for these things. 

The issue I have is I only want to borrow slightly less than the £7500. So my question is, how do lenders react if you borrow the larger amount but immediately overpay the amount you didn't require. 

Is this something I can even do or would they alter the rate on the loan to take into account the overpayment shifting me to a higher rate?

MorningcoffeeIV

You can repay, subject to the two months early repayment fee. The underlying rate won't be changed.

The monthly amount may or may not be recalculated, depending on the lender.

Your credit rating isn't a factor in lending decisions. You'll be assessed by each lender for risk.

With a current loan at a high risk rate, you should be prepared for a second loan to be at least as poor a rate.

grant89uk

MorningcoffeeIV said:

You can repay, subject to the two months early repayment fee. The underlying rate won't be changed.

The monthly amount may or may not be recalculated, depending on the lender.

Your credit rating isn't a factor in lending decisions. You'll be assessed by each lender for risk.

With a current loan at a high risk rate, you should be prepared for a second loan to be at least as poor a rate.

I am almost 99% sure any loan I get will be at a much better rate than the current one. The only reason its as high is because of who the lender is. I had some work carried out on the house and at the time they offered to arrange the finance. I was pretty busy at the time and went ahead with it on the intention that I would refinance it at a later date. 

Literally all I wanted to get was guidance on how a lender will react if you make a large overpayment, not full repayment early on. 

Cheers.

Nasqueron

Remember that companies consider debts as combined, not as one minus the other - so if you take out a loan for £7000 at 13% and then try and take out a £7500 loan at 6%, the lender will assume it is £14500 of debt - as there is no way to guarantee you would use the money to pay off the first debt so they have to work on the basis you could spend it all on chocolate in the clearance sale. If your finances (income/debt) allow you to borrow that much you should get it, if they consider the debt too high, they will either offer less or higher rates, or not at all. Your fake credit score is never seen by lenders, only the credit history.