I am genuinely confused, why can't I get a loan?

Shireknight01

I have a spotless credit record Clearscore/Experian rates me at 1000/1000 Credit Karma rate me at 659/710

I have a mortgage with £200 left to pay (the repayments are £22 per month) with an attached mortgage reserve facility which currently stands at -£15000 and which needs to be paid off at the same time that the mortgage is paid off.

Fully aware of this I would like to borrow £15000 to pay the reserve off and then clear the mortgage completely next month.

The repayments on this loan would be £300 per month for 5 years.

Last year I became classed as disabled due to osteoarthritis in both hips and lower spine so admittedly I am on benefits.

My income is £1282 per month made up of DWP £854 plus PIP of £428

I understand that the Universal Credit part can't be classed as disposable income, but that still leaves me with over £858 per month after bills because I practically don't have any mortgage or rent to pay so the Universal credit easily covers everything else.

So why can't I get approval for the loan? The Tesco Bank computer said no even though I've had a credit card with them for well over ten years and my bank who I've banked with for donkey's years just declined me saying my income isn't £1282 (I assume they are making a deduction because some of it is Universal Credit) but still £858 of disposable income per month VS a £300 per month loan repayment it's not rocket science I can afford that easily, so what's the problem?

Can anyone explain what's going wrong or is it simply because I'm disabled and they dare not take the risk in case I suddenly get better? (not that that should make a difference because if I suddenly got better then I would go back to work again as I have done for the past 35 odd years -I'm confused.

Grumpy_chap

https://forums.moneysavingexpert.com/discussion/6669317/i-am-genuinely-confused-why-cant-i-get-a-loan

The application for the loan probably assumes £15k loan on top of the £15k mortgage.

Is a loan really cheaper than the mortgage?

TadleyBaggie

So you are £15K in debt and want to borrow £15K, that's what lenders will assume, they will not assume you will pay off the existing debt. So £30K of debt is not sustainable on that income, and likely for the refusal to lend.

flaneurs_lobster

Can the £15k reserve not be converted into a remortgage deal?

Would this not be cheaper than an unsecured loan?

Shireknight01

The interest on both the loan and the Mortgage reserve are around the same rate, the problem is that if I do nothing the mortgage is going to expire in a few months regardless and on that day the Mortgage reserve balance becomes due. Yes I can reduce the reserve by a couple of grand by December but no way can I clear it completely so I just wanted to sort it out now and be left with a single monthly repayment.

If the bank won't lend me the money then I'm wondering what they intend to do on that day, they say your house could be repossessed but clearly that's not going to happen, so I wonder if the reserve just continues as it is (It's like a separate bank account that runs alongside the mortgage which charges me monthly interest based on the outstanding amount) and I just won't be able to withdraw any more money out of it or if it becomes classed as an unauthorised overdraft, which would be very expensive I would imagine.

Shireknight01

https://forums.moneysavingexpert.com/discussion/comment/82007290#Comment_82007290

Oh do you that is what they are thinking? I did specify in the application that the loan is to consolidate existing debt but yeah maybe they simply don't believe that I will use the money to clear the mortgage. It's a bit much to just assume that I'm lying though lol, what an untrusting bank.

Shireknight01

https://forums.moneysavingexpert.com/discussion/comment/82007302#Comment_82007302

Yeah I guess that's another thing I could do but then I'd have to pay application fees and solicitors fees and can you even get a five year mortgage for £15000? It seems a lot of faff when a personal loan would be easier for everyone.

Isthisforreal99

Blame the people that shouted 'irresponsible lending' after being offered loans etc when in a similar situation to you (on benefits etc). Lenders, understandably, tightened their criteria and unfortunately for you, you do not fit the mass profile.

Shireknight01

https://forums.moneysavingexpert.com/discussion/comment/82007335#Comment_82007335

That is so true, ok I guess the best thing is just to wait until the mortgage runs out and see what happens then.

GrumpyDil

Have you tried asking the mortgage company what options they can give you in the event that you are not able to clear the money when the main mortgage runs out?

Brie

Personally I was wondering if it was that you were asking for a loan to pay off a mortgage. I didn't think that banks would allow that. But yes if you just said to clear a debt and didn't specify then they'd be thinking of debt consolidation and wouldn't be happy about that either as Tadley has mentioned.

I'd ask them about remortgaging as that is really what is needed at this point. Might cost a few hundred if there are fees involved but that might be worth it to get a better rate than you might on a regular loan.