Extending Current Loan

holyfire82 · 10 May 2018 at 12:09PM

Hi

I got a loan fomr my bank (santander) for £3000 over 4 years in feb this year, i had to pay for some unexpected things (funeral etc.) and was accepted fine. I also have an overdraft of £1300 on my account, which i really want to cancel.

Anyway - i was stupid and didnt realise that my loan has an apr of 21%, and if i had gotten a loan of more than £5000 the apr would decrease massively to around 5%. i had asked the bank the next month about changing my loan but was told that id need to wait 90 days before applying for this.

I have been overdrawn over a few times, and have a regularly monthly wage (roughly £1350) every month and anytime i have been overdrawn (twice this year) its been cleared on my pay day. I am actually just into my overdraft today but in two weeks get paid so thatll clear that.

I am asking that in 3 weeks time if i apply to extend the loan amount am i likely to be rejected being so soon, is my overdraft affecting my credit rating? Using experian it says i have a credit rating of 950 which is good.

any advice would be great. thanks

PeacefulWaters · 10 May 2018 at 12:16PM

Using experian it says i have a credit rating of 950 which is good an irrelevant number not used by those who lend you money.

Hope that adjustment helps.

holyfire82 · 10 May 2018 at 12:27PM

haha ok sorry.

so what is going to affect my 'score' for my bank?

and as per my original question - is it safe for me to increase my loan in 3/4 weeks time? Or is the fact that i got my loan out 3 months ago and an overdraft 3/4 months ago going to mean im rejected?

I have never been in debt or had any other loans until now by the way.

Xbigman · 11 May 2018 at 6:49AM

Its not a loan extension. What will happen is that Santander will generate a settlement figure, with early settlement interest at 21%, and then create a new loan for you. Paying off the old loan with the new loan and giving you the leftover amount.

That's assuming they give you this loan at all. You borrowed £3k over 4 years and they thought you were such a bad risk they hit you with 21% interest. That's a good indication of what they think of your credit history.

I can believe you are a first time borrower because you are making every mistake in the book. Borrowing more to pay less is not the way to look at it. Borrowing over longer terms to pay less is even worse, and that will be where you go next. The way out is to control your spending and clear your overdraft a bit each month until it is gone. Then make overpayments on this horrendous loan and clear that. The technical term for the position you will then find yourself in is 'debt free'.
Playing the overdraft/loan merry go round is the route to misery.

Darren

holyfire82 · 11 May 2018 at 7:37AM

wow - your reply has me very worried!

just to clarify a few points though:

santander's normal rate for a £3000 loan over 48 months is 15-16% using their website - and mine is actually 20.9% - its higher but not like its way higher.

I know I dont have a bad credit history - i think my problem until 6 months ago is that I did have ANY credit history. I have never had a loan before, never had an overdraft, never had a credit card. I guess this was bad in that sense right?

My overdraft isn't a real issue, I only ever got it is an emergency stop so to speak. Since getting it i've been overdrawn a max of 3/4 days in total in the last 6months , and only a fraction of the overdraft itself (approx £90 overdrawn ) - i get paid and the overdraft is cleared immediately. i don't 'live' in my overdraft in any way so dont need to 'pay it off', other than the once or twice ive been overdrawn by a tiny amount near the end of ta month once or twice, which i did anyway.

With this in mind, and the fact ive paid 3 or 4 loan repayments on time etc I would have thought my credit rating might be actually better for the bank now as the bank can see im making regular payments.

extending, or getting a larger loan isnt vital, but i wish i would have gotten a larger amount back i feb and would like to address that if i could.

but after all being said are they likely to reject me?

any comments or help appreciated, thanks

DCFC79 · 11 May 2018 at 8:26AM

The bank doesnt see the number so even if it does increase no 1 but you will see the increase, the bank just gets the loan payments.

holyfire82 · 11 May 2018 at 8:56AM

i meant would the last 6 months of actually paying a loan and being overdrawn slightly once to twice and paying it off improve my credit history (not my rating/score)

as ive said - is it possible for me to redo my loan/extend it/increase it or am i likely to be rejected?

Pixie5740 · 11 May 2018 at 8:59AM

holyfire82 wrote: »

i meant would the last 6 months of actually paying a loan and being overdrawn slightly once to twice and paying it off improve my credit history (not my rating/score)

as ive said - is it possible for me to redo my loan/extend it/increase it or am i likely to be rejected?

Dipping into your overdraft doesn't look good to lenders. It shows that you have trouble budgeting, especially if it is a frequent occurrence.

https://www.moneysavingexpert.com/loans/credit-rating-credit-score

holyfire82 · 11 May 2018 at 10:04AM

Pixie5740 wrote: »

Dipping into your overdraft doesn't look good to lenders. It shows that you have trouble budgeting, especially if it is a frequent occurrence.

I read a bit on some websites i didn't think this was true really. Going overdrawn a little and haying it off within a few days shows i can pay off debts.

When i first got my loan i was told the reason the APR was higher than normal was really down to the fact i had no credit history and was i guess an 'unknown' to the bank in terms of ability to pay off debts. Would this have been right?

and not to labour the point - but am i likely to be rejected for the extension/new loan or is it best to leave it another few months or shouldnt that matter?

thanks again

Pixie5740 · 11 May 2018 at 10:38AM

holyfire82 wrote: »

I read a bit on some websites i didn't think this was true really. Going overdrawn a little and haying it off within a few days shows i can pay off debts.

You can tell the lender that then if you are declined another loan.

holyfire82 wrote: »

When i first got my loan i was told the reason the APR was higher than normal was really down to the fact i had no credit history and was i guess an 'unknown' to the bank in terms of ability to pay off debts. Would this have been right?

Quite possibly, but as you will have read in the link I provided credit history, or lack of, is only part of the story.

holyfire82 wrote: »

and not to labour the point - but am i likely to be rejected for the extension/new loan or is it best to leave it another few months or shouldnt that matter?

thanks again

How would we know? No one of this forum has a clue what Santander's internal lending policy is and how they determine what rate to offer and to whom. You could do worse than trying the MSE loan eligibility calculator.

https://www.moneysavingexpert.com/eligibility/loans-calculator/

badmemory · 11 May 2018 at 11:09AM

Rather than sink your hard earned into this, why not look at some debt free wanabees stories & see what you could avoid. Because your next interest rate will not be 21% it will be more like 30% or more. The basic principle is that no-one wants to lend to someone who actually NEEDS to borrow. The greater the need the higher the %.

Extending Current Loan

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