Applying for two smaller personal loans instead of one bigger one: good idea?

derek1977

Hi

I wish to take out a large loan (£18000) to consolidate many credit card debts. There are multiple loans available to me (via credit report sites like TotallyMoney/ClearScore) with rates much lower than my credit card rates.

When I search for loans at half that amount, there are several more offers from lenders. In most cases, the rates are about the same (a couple are lower, some higher) but not significantly different.

So I am thinking that my chances of getting approved for two simultaneous smaller loan applications are probably higher (less risk to the lenders).

However, my main concern is that one lender will see the hard credit search from the other lender when they do their hard search and this may put them off.

Can I expect the hard credit searches of the lenders to appear immediately? And if one does see the hard search from the other, is this likely to be very damaging? Or would applying for two loans at the same time be considered reasonable?

BTW, in all cases the loans are supposedly "pre-approved" with "100% chance of acceptance". However I really doubt that for such a large loan this is really the case, and suspect that smaller loans are more likely to come through!

Many thanks

Brie

There are a number of reasons this probably won't work.  

First is being pre approved.  That really means nothing at all because no lender has looked at anything.  So it's just a guess, albeit a calculated one, by the company doing the scoring.

Secondly if you have a load of debt why would anyone want to loan you money?  You are likely struggling to make payments, possibly paying the minimum, possibly stoozing to cover yourself so why would a lender think you are a good risk?

Thirdly getting a new debt (loan(s)) to pay off an old debt isn't a good strategy.  Assuming you do get a loan, big or small, if you are struggling with the cards what will happen when you start to struggle with the loan(s)?  You'll likely start using the cards you cleared again to help make ends meet.  

Sorry to be a doom and gloom merchant but these things rarely end well.

If you want some more positive advice I suggest you nip over to the debt free forum and fill out a statement of accounts (SOA) on the top sticky and then ask for help on balancing your budget and see what other solutions might be available.  There's bound to be some excellent advice for you and hopefully you can find a way out of this hole.

cymruchris

As above - anything that says high chance/pre-approved/10 out of 10 is all a load of guff. It's a preliminary 'guess' before a hard search is completed and a 'grown-ups' decision is made.

It may be accurate - it may not be accurate - you won't know until you hit the 'apply' button - but don't be surprised if after your 'guaranteed approval' they say no. It happens more often than people think.

There's a fair chance when they see these credit card debts you have in more detail - they'll be inclined to either say a flat no, or give you a far higher APR than you're seeing in the provisional checks screen.

If you do go down the loan route (and it's not recommended) - and they happen to say yes - then once the cards are clear - you close them. You then don't apply for more credit until the loans are fully settled. What happens is people take out a loan - say 'Oh I can afford that payment' - 'I'll just pop this on the credit card' and before you know it you're back to square one now owing twice as much. (And at that stage I can pretty much guarantee nobody is going to give you a loan).

You have to be serious with yourself and ask - 'How did I get to where I am?' - Now's likely the time you need to be making as many cutbacks as possible, cancelling as many subscriptions as you can, reducing the amount you spend on anything other than essentials with the sole purpose of getting your debt down. It's tough. But that's the best way to address the problem, and get used to living within your means, no matter how hard it is.

There are ways to get through it - but a loan is rarely the answer.

derek1977

Brie said:

There are a number of reasons this probably won't work.  

First is being pre approved.  That really means nothing at all because no lender has looked at anything.  So it's just a guess, albeit a calculated one, by the company doing the scoring.

Secondly if you have a load of debt why would anyone want to loan you money?  You are likely struggling to make payments, possibly paying the minimum, possibly stoozing to cover yourself so why would a lender think you are a good risk?

Thirdly getting a new debt (loan(s)) to pay off an old debt isn't a good strategy.  Assuming you do get a loan, big or small, if you are struggling with the cards what will happen when you start to struggle with the loan(s)?  You'll likely start using the cards you cleared again to help make ends meet.  

Sorry to be a doom and gloom merchant but these things rarely end well.

If you want some more positive advice I suggest you nip over to the debt free forum and fill out a statement of accounts (SOA) on the top sticky and then ask for help on balancing your budget and see what other solutions might be available.  There's bound to be some excellent advice for you and hopefully you can find a way out of this hole.

Who said I was struggling with the cards? I've never missed a payment.

In any case I have a very substantial tax free lump sum to take from my pension in 12 months.

While I've no doubt your intentions are good, I'm afraid your response in no way addressed my questions!

derek1977

cymruchris said:

As above - anything that says high chance/pre-approved/10 out of 10 is all a load of guff. It's a preliminary 'guess' before a hard search is completed and a 'grown-ups' decision is made.

It may be accurate - it may not be accurate - you won't know until you hit the 'apply' button - but don't be surprised if after your 'guaranteed approval' they say no. It happens more often than people think.

There's a fair chance when they see these credit card debts you have in more detail - they'll be inclined to either say a flat no, or give you a far higher APR than you're seeing in the provisional checks screen.

If you do go down the loan route (and it's not recommended) - and they happen to say yes - then once the cards are clear - you close them. You then don't apply for more credit until the loans are fully settled. What happens is people take out a loan - say 'Oh I can afford that payment' - 'I'll just pop this on the credit card' and before you know it you're back to square one now owing twice as much. (And at that stage I can pretty much guarantee nobody is going to give you a loan).

You have to be serious with yourself and ask - 'How did I get to where I am?' - Now's likely the time you need to be making as many cutbacks as possible, cancelling as many subscriptions as you can, reducing the amount you spend on anything other than essentials with the sole purpose of getting your debt down. It's tough. But that's the best way to address the problem, and get used to living within your means, no matter how hard it is.

There are ways to get through it - but a loan is rarely the answer.

Hi.

My profligacy with credit cards was perhaps none-too-smart (though I've never missed a payment) but has largely been due to the fact I have a very substantial tax free lump sum to take from my pension in 12 months. I am in no doubt at all that taking out a loan to clear the cards and reduce the amount of interest I'm paying is what I want to do.

I'm well aware that the "100% approval" is too good to be true. That's why I'm interested in knowing how to maximise my chances of getting a loan (or two!)! Two small, or one big?

While I've no doubt your intentions are good, I'm afraid you entirely skirted the question!

cymruchris

derek1977 said:

Brie said:

There are a number of reasons this probably won't work.  

First is being pre approved.  That really means nothing at all because no lender has looked at anything.  So it's just a guess, albeit a calculated one, by the company doing the scoring.

Secondly if you have a load of debt why would anyone want to loan you money?  You are likely struggling to make payments, possibly paying the minimum, possibly stoozing to cover yourself so why would a lender think you are a good risk?

Thirdly getting a new debt (loan(s)) to pay off an old debt isn't a good strategy.  Assuming you do get a loan, big or small, if you are struggling with the cards what will happen when you start to struggle with the loan(s)?  You'll likely start using the cards you cleared again to help make ends meet.  

Sorry to be a doom and gloom merchant but these things rarely end well.

If you want some more positive advice I suggest you nip over to the debt free forum and fill out a statement of accounts (SOA) on the top sticky and then ask for help on balancing your budget and see what other solutions might be available.  There's bound to be some excellent advice for you and hopefully you can find a way out of this hole.

Who said I was struggling with the cards? I've never missed a payment.

In any case I have a very substantial tax free lump sum to take from my pension in 12 months.

While I've no doubt your intentions are good, I'm afraid your response in no way addressed my questions!

Nobody said you were struggling. Having never missed a payment is positive - but carrying a long-running balance making minimum to near minimum payments over a long period can be negative. It's good you have the lump sum coming - but the underlying theme (even if you're absolutely not struggling, and all is well with the world) would be to ask how you got yourself to the £18k in debt - it may be that it's been planned purchases - but if it's from more general overspending, it's something that through eradicating the debt you try not to get into the same boat further down the line.

The general advice that's been given is a fairly standard response to anyone that thinks a loan is the answer to a credit card debt. If there are additional circumstances that need to be factored in - then through discussion it may very well be that you have your plan in place as to how you want to reduce the debt, and not run such a balance over the long term.

None of us know your specific circumstances - so by adding to the discussion we can help point you in a better direction as to how you money save the most (hence the name of the site). The same still stands though, in that a loan is rarely the answer to a credit card debt.

cymruchris

derek1977 said:

cymruchris said:

As above - anything that says high chance/pre-approved/10 out of 10 is all a load of guff. It's a preliminary 'guess' before a hard search is completed and a 'grown-ups' decision is made.

It may be accurate - it may not be accurate - you won't know until you hit the 'apply' button - but don't be surprised if after your 'guaranteed approval' they say no. It happens more often than people think.

There's a fair chance when they see these credit card debts you have in more detail - they'll be inclined to either say a flat no, or give you a far higher APR than you're seeing in the provisional checks screen.

If you do go down the loan route (and it's not recommended) - and they happen to say yes - then once the cards are clear - you close them. You then don't apply for more credit until the loans are fully settled. What happens is people take out a loan - say 'Oh I can afford that payment' - 'I'll just pop this on the credit card' and before you know it you're back to square one now owing twice as much. (And at that stage I can pretty much guarantee nobody is going to give you a loan).

You have to be serious with yourself and ask - 'How did I get to where I am?' - Now's likely the time you need to be making as many cutbacks as possible, cancelling as many subscriptions as you can, reducing the amount you spend on anything other than essentials with the sole purpose of getting your debt down. It's tough. But that's the best way to address the problem, and get used to living within your means, no matter how hard it is.

There are ways to get through it - but a loan is rarely the answer.

Hi.

My profligacy with credit cards was perhaps none-too-smart (though I've never missed a payment) but has largely been due to the fact I have a very substantial tax free lump sum to take from my pension in 12 months. I am in no doubt at all that taking out a loan to clear the cards and reduce the amount of interest I'm paying is what I want to do.

I'm well aware that the "100% approval" is too good to be true. That's why I'm interested in knowing how to maximise my chances of getting a loan (or two!)! Two small, or one big?

While I've no doubt your intentions are good, I'm afraid you entirely skirted the question!

Now that we have this new information that you have a tax free lump sum coming that will cover the debt (and hopefully more) - that can put a slightly different slant on things. If you have the funds coming that will guarantee the complete killing of the debt in 12 months, and you won't need further credit at that stage due to this increase in available funds - then a loan might work out in this specific circumstance (although the underlying theme of running up the debt in the first place needs to be kept in mind beyond the lump sum).

If you've had these existing cards for a good while, and have run a balance for a long time while never missing a payment - that can still be a negative on your application when they credit profile you, as credit providers don't necessarily like customers to be running higher balances closer to their credit limits for a long time.

Nobody knows the exact systems each lender works on - so there is a chance that applying for one will result in an automatic decline on the other - as they see the hard search that's just been completed. The number of people that have applied for two loans at the same time compared to one big loan will be relatively small as a percentage, and the likelihood of there being registered members that can answer the question with a cast iron guarantee I think will be zero - as there's no cast iron guarantee you'll get anything.

Out of the two choices - if the income was solid - I'd be going for one single loan, so that the chance of a second decline because of the first hard search was eradicated. But that's me. Others might have a different view.

Nasqueron

Lenders will look at the loan as a debt in ADDITION to your credit card, not a replacement as there is no guarantee that you would use the loan to pay for the cards - they cannot force you to do it.

As such if you have, say £18,000 of credit card debt, and want a loan for £18,000, they would look on your affordability to service a £36,000 debt (or if you split it, 2 lenders would look at your ability to pay a £27,000 debt for example). If your income could service a £36k debt (say you were on 70k a year) then great, if your income is say £30k a year, then no chance would you get the loans

derek1977

Nasqueron said:

Lenders will look at the loan as a debt in ADDITION to your credit card, not a replacement as there is no guarantee that you would use the loan to pay for the cards - they cannot force you to do it.

As such if you have, say £18,000 of credit card debt, and want a loan for £18,000, they would look on your affordability to service a £36,000 debt (or if you split it, 2 lenders would look at your ability to pay a £27,000 debt for example). If your income could service a £36k debt (say you were on 70k a year) then great, if your income is say £30k a year, then no chance would you get the loans

When you do the loan search from a credit agency site you specifically state it is a debt consolidation loan. You appear to get more and better offers when searching for a consolidation loan - which would indicate that they have at least some faith that this is what you actually intend to do, though I guess you're right that they cannot force you to.

It also (perhaps) means that they will not be surprised or turned off by existing debts equal to or exceeding the loan value (in fact would be put off if you did not have those debts!), and that this was taken into consideration when obtaining their so-called "pre-approval".

My income is over 70k so the "pre-approval" is not entirely unlikely to be meaningful.

But I still worry that it is a big ask. Which is why I'm interested in opinions on whether my chances are liable to be improved or worsened by applying for  two smaller loans - in particular whether hard searches show up immediately and whether making two applications each covering half the debt to consolidate would be viewed negatively (even if one vendor does see the other vendor's hard search).

Superhoopza

Whilst there was some sound, 'standard' advice that taking credit is not advisable (who knew!), to actually answer your question, from my experience, I think if you did eligibility checkers with two providers you want to take a loan from, get commitments from the soft search, then if you were to do both applications very close together (say within an hour, at least the same day), then lenders won't see the other search and certainly the approved loan 1 will not appear on your credit report for a minimum of a few days, by which you will have got the second loan approved or declined.

If you were looking for debt advice then some of the points made here would be valid, but hopefully the above guides you. I found I was getting offered more loans for several weeks and months until all my credit facilities were appearing on my report and then when the total credit available to me increased on my report, my offers dried up. This took a while to happen though. If you know what you are doing with the credit and how you use it is up to you.

I do caveat it by saying nothing is guaranteed but in my opinion and experience, you are more likely to get both loans if you do the applications very close together.

Nasqueron

derek1977 said:

Nasqueron said:

Lenders will look at the loan as a debt in ADDITION to your credit card, not a replacement as there is no guarantee that you would use the loan to pay for the cards - they cannot force you to do it.

As such if you have, say £18,000 of credit card debt, and want a loan for £18,000, they would look on your affordability to service a £36,000 debt (or if you split it, 2 lenders would look at your ability to pay a £27,000 debt for example). If your income could service a £36k debt (say you were on 70k a year) then great, if your income is say £30k a year, then no chance would you get the loans

When you do the loan search from a credit agency site you specifically state it is a debt consolidation loan. You appear to get more and better offers when searching for a consolidation loan - which would indicate that they have at least some faith that this is what you actually intend to do, though I guess you're right that they cannot force you to.

It also (perhaps) means that they will not be surprised or turned off by existing debts equal to or exceeding the loan value (in fact would be put off if you did not have those debts!), and that this was taken into consideration when obtaining their so-called "pre-approval".

My income is over 70k so the "pre-approval" is not entirely unlikely to be meaningful.

But I still worry that it is a big ask. Which is why I'm interested in opinions on whether my chances are liable to be improved or worsened by applying for  two smaller loans - in particular whether hard searches show up immediately and whether making two applications each covering half the debt to consolidate would be viewed negatively (even if one vendor does see the other vendor's hard search).

Debt consolidation as the purpose doesn't mean anything beyond form filling, they can't force you to pay off your CC debts as you could just splash out on a holiday or a car

The pre-approval is meaningless, they don't take into account anything as the CRA isn't the lender and the lender won't make a decision until the hard search is done and then they will look at debt, history and what you want to borrow. 

When you do a loan application you will get a hard search immediately yes, the next lender would then take that into account as well. Whether you could get an unsecured personal loan for 18k is neither here nor there but with a 70k+ income paying off your debts shouldn't be a major issue without taking on further debt to pay off debt.

No-one can tell you the chances because the chances are decided by computers at the loan company. Personally if I was doing it, I'd just do the single larger loan and again, with your level of income, covering the rest isn't likely to be difficult