Why Can't I Refinance My HSBC Loan at a Lower Rate?

Sasek

Hello,

I'm hoping to get some advice on my personal loan situation as I'm a bit stumped, especially considering my financial stability. My main goal is to decrease the annual interest rate on my current personal loan.

Here's my situation:

• Citizenship & Residence: Dual EU/British citizen, living in the UK since March 31st, 2018. I've been at my current address in Essex since December 2018. The house was sold about a year ago, and I now pay rent to a property management company (ABCDEF Investment). I'm 51 years old and registered on the Electoral Register.

• Employment & Income: I've had the same job as an IT Support Engineer since May 2018. My annual salary is £32,374.

• HSBC Personal Loan:

  • Original amount: £25,000 (taken around July 2022)

  • Original number of payments: 96

  • Repayments completed: 36

  • Repayments remaining: 60

  • Outstanding balance: £22,358.40

  • Today's Final Settlement amount: £18,215.41

  • Monthly payment: £372.19 (due 29th of each month)

  • Debit interest rate: 9.90% APR

  • I have never missed a payment.

• HSBC Credit Card:

  • Limit: £2,000

  • Current balance: £874.36 (meaning I'm £1125.64 away from my limit)

  • Estimated interest rate: Around 34% annually (I can't find the exact rate easily).

• Savings: I have a Stocks & Shares ISA with a positive balance of around £28,500. I would prefer not to use these funds to pay off the loan, even though I understand it would be a sensible option.

• Rent: My rent has increased significantly over time. It was £495/month, then £770, and from next month, it will be £870/month. I also own properties abroad.

My Attempts So Far:

Several months ago, I tried refinancing my personal loan by applying for offers listed on MSE (Tesco, M&S, etc.). All applications were declined, regardless of the information I provided. I regularly receive loan offers from Clearscore, Credit Karma, etc., but these are always for very high interest rates (30-40% APR).

I also tried to apply for a consolidation/refinance loan with HSBC UK. This somehow registered as an application for an additional £20,000 loan, which HSBC offered at 15% APR. I called them to explain the mistake (I wanted to refinance my existing loan and consolidate my credit card debt, which I was happy to close), but they said it couldn't be changed and I would have to apply again, which I didn't do. I also asked HSBC if they would simply decrease my current loan's interest rate, and they stated they don't do that.

My Questions:

1. Why am I getting declined for lower interest rate loans? Given my consistent employment, stable income (£32,374), long-term address, British citizenship, electoral register listing, and perfect payment history, I believe I should have a strong credit profile. Why are lenders like Tesco and M&S declining my applications when they advertise much lower rates?

2. Credit Card Strategy: I have enough cash to pay off my credit card balance of £874.36. Should I do this immediately, or should I keep it as it is and try to apply for a consolidation loan (my personal loan plus the outstanding credit card balance)? The credit card interest rate is much higher than my personal loan.

3. Reporting Rent/Housing: My rent is currently £770, going up to £870 next month, paid to a property management company (ABCDEF Investment). I also own properties abroad. In loan applications, should I accurately list my high rent, or are there circumstances where it might be better to select an option like 'living with parents' (even though I'm not) if it doesn't clearly show as a traditional rental payment on my statements, to make my financial position appear more favourable? I want to be honest but also understand how these applications are assessed.

4. Best Approach to Lower Interest Rate: My sole objective is to decrease my personal loan's interest rate (and ideally my monthly payment too). What is the best way to achieve this? Should I continue applying online for the "best offers" listed on MSE, or would making an in-person appointment at one of these banks (e.g., Tesco Bank, M&S Bank) be a more effective strategy? I am open to any and all suggestions.

Thank you in advance for any insights and advice you can offer.

Isthisforreal99

Frankly, I'm amazed you got a loan for £25k on a £32k salary.

They now think there is affordability concerns, which should have been there in 2022.

TadleyBaggie

It would appear to lenders you have around £20K of debt and you want to take out £20K more. The fact that you intend to pay off the original loan will not be assumed by lenders. So it looks like you are trying to increase your debt to £40K on a £32K income. This simply won't happen.

Isthisforreal99

What's your net take home pay?

kimwp

Loans aside, why would you pay 34% interest on a credit card debt that you can afford to pay off?

Back to the loan - as others have said, regardless off what you put on the application,  you are applying for a £20k loan on top of your existing 22k loan and 2k credit card. They have to assume you won't use the new loan to pay off the old one. So that would be 44k debt on a 32k salary.

You could pay off the loan, wait until your credit history settles and try for a lower interest loan if you are determined to have debt alongside savings. No guarantee of a new loan of course.

Emmia

If you own properties abroad could you sell one to let you pay off your debts?

Alternatively as you seem to be in a bit of a financial pickle, have you looked at your budget/spending to see if there are any areas you could economise to pay your loan off faster? You could start by filling in an SOA - link below.

https://www.lemonfool.co.uk/financecalculators/soa.php

Sasek

Is there no way for me to take a 'consolidation' loan where the new loan/bank would automatically pay off the old loan and credit card balance and even close down my credit card? This is 100% possible in Europe and I would be really suprised if this would not be available here. I honestly do not want to take on additional loan, just refinance the existing loan at a better interest rate. The reason I don't want to pay it off currently is - I will have some money come to me in about a year and I need to 'survive' until then. 

To answer the question about my NET monthly income - the minimum is £2048/month but often it is more as I may do some overtime etc. 

My idea was to apply for a loan at whichever bank and have that bank just repay and close down my existing loan and potentially credit card directly with HSBC (someone says it may be better to combine the loan and credit card balance via the consolidation loan). 

Emmia

Sasek said:

Is there no way for me to take a 'consolidation' loan where the new loan/bank would automatically pay off the old loan and credit card balance and even close down my credit card? This is 100% possible in Europe and I would be really suprised if this would not be available here. I honestly do not want to take on additional loan, just refinance the existing loan at a better interest rate. The reason I don't want to pay it off currently is - I will have some money come to me in about a year and I need to 'survive' until then. 

To answer the question about my NET monthly income - the minimum is £2048/month but often it is more as I may do some overtime etc. 

My idea was to apply for a loan at whichever bank and have that bank just repay and close down my existing loan and potentially credit card directly with HSBC (someone says it may be better to combine the loan and credit card balance via the consolidation loan). 

But the banks don't normally let you "refinance" in the way you're seeking.

If you don't get a "consolidation loan", what is your plan to pay off the loan and credit card?

Sasek

Emmia said:

Sasek said:

Is there no way for me to take a 'consolidation' loan where the new loan/bank would automatically pay off the old loan and credit card balance and even close down my credit card? This is 100% possible in Europe and I would be really suprised if this would not be available here. I honestly do not want to take on additional loan, just refinance the existing loan at a better interest rate. The reason I don't want to pay it off currently is - I will have some money come to me in about a year and I need to 'survive' until then. 

To answer the question about my NET monthly income - the minimum is £2048/month but often it is more as I may do some overtime etc. 

My idea was to apply for a loan at whichever bank and have that bank just repay and close down my existing loan and potentially credit card directly with HSBC (someone says it may be better to combine the loan and credit card balance via the consolidation loan). 

But the banks don't normally let you "refinance" in the way you're seeking.

If you don't get a "consolidation loan", what is your plan to pay off the loan and credit card?

If I don't manage to refinance it with a lower interest rate, I will just continue to make the monthly payments of £372.19/month for another year and half at which point I should have enough funds to pay off the rest of the loan. I am really really suprised there is no way for another bank to give me a loan to pay off the other loan. Europe has this available for decades now and even in the UK you have this same for credit card offers (you see this a lot on MSE - move your credit card with this special offer to this other bank). Why couldn't there be a way for me to 'move' my loan to a different bank under better conditions (interest rate)? 

Isthisforreal99

Sasek said:

Emmia said:

Sasek said:

Is there no way for me to take a 'consolidation' loan where the new loan/bank would automatically pay off the old loan and credit card balance and even close down my credit card? This is 100% possible in Europe and I would be really suprised if this would not be available here. I honestly do not want to take on additional loan, just refinance the existing loan at a better interest rate. The reason I don't want to pay it off currently is - I will have some money come to me in about a year and I need to 'survive' until then. 

To answer the question about my NET monthly income - the minimum is £2048/month but often it is more as I may do some overtime etc. 

My idea was to apply for a loan at whichever bank and have that bank just repay and close down my existing loan and potentially credit card directly with HSBC (someone says it may be better to combine the loan and credit card balance via the consolidation loan). 

But the banks don't normally let you "refinance" in the way you're seeking.

If you don't get a "consolidation loan", what is your plan to pay off the loan and credit card?

If I don't manage to refinance it with a lower interest rate, I will just continue to make the monthly payments of £372.19/month for another year and half at which point I should have enough funds to pay off the rest of the loan. I am really really suprised there is no way for another bank to give me a loan to pay off the other loan. Europe has this available for decades now and even in the UK you have this same for credit card offers (you see this a lot on MSE - move your credit card with this special offer to this other bank). Why couldn't there be a way for me to 'move' my loan to a different bank under better conditions (interest rate)? 

But your income doesn't allow you to do that. As I said earlier I'm amazed anyone would lend £25k to someone on £32k. 

Also, there is no guarantee you would get a better rate than the 9.9%, which can be beaten but is certainly not the worst rate out there.

What was the purpose of the original £25 loan?

mjm3346

You should simply pay it off which would leave you with about £9k in savings which you could add to at over £350 a month - in the unlikely event you could get another loan odds are the interest rate will be well over 9.9%