Refused a loan, can't understand why.
Discussion
Hello I'm a long time lurker.
I've just been refused an £11,000 loan and I'm not sure why.
I have a reasonably well paid job, which is as secure as any job can be. Gross 45k a year. I owe about 6k on a credit card and a car Finance deal which is about 500 a month.
I'm coming clear every month once bills are paid with getting on for £1,000
I've got modest savings and I never exceed overdraft limits.
I make more than the minimum payment on the card.
I own my own home, no mortgage it's mine.
I have had loans in the past with my bank, all paid back properly.
My Experian report says my credit rating is more or less as high as it can be.
For some reason I am listed as not on the electoral roll. I am now and I have been at this address before. Lived at this address 4 years, the one before six, and before that 10-plus.
The purpose of the loan was home improvement and to clear the card and was prompted by my bank sending me out blurb inviting me to apply as a valued customer preferential rates etc etc.
So what have I done wrong? More importantly how do I fix it?
I've just been refused an £11,000 loan and I'm not sure why.
I have a reasonably well paid job, which is as secure as any job can be. Gross 45k a year. I owe about 6k on a credit card and a car Finance deal which is about 500 a month.
I'm coming clear every month once bills are paid with getting on for £1,000
I've got modest savings and I never exceed overdraft limits.
I make more than the minimum payment on the card.
I own my own home, no mortgage it's mine.
I have had loans in the past with my bank, all paid back properly.
My Experian report says my credit rating is more or less as high as it can be.
For some reason I am listed as not on the electoral roll. I am now and I have been at this address before. Lived at this address 4 years, the one before six, and before that 10-plus.
The purpose of the loan was home improvement and to clear the card and was prompted by my bank sending me out blurb inviting me to apply as a valued customer preferential rates etc etc.
So what have I done wrong? More importantly how do I fix it?
"not on the electoral roll"
"I owe about 6k on a credit card" (lenders will take 3% of balance as the payment = £180)
"Car Finance deal which is about 500 a month" (makes your credit commitments £680pm even before new loan is taken into account)
"no mortgage" (this is a good thing for you but not lenders who can't see how you would maintain a large debt)
"The purpose of the loan was home improvement and to clear the card" (Debt Consolidation, lenders will assume you will take the loan and not pay the card off)
Why take another loan to pay off the CC's if you have savings? Pay them off, take the loan for the HI's that you need, replenish savings with the money not being paid on CC's or a higher loan....
"I owe about 6k on a credit card" (lenders will take 3% of balance as the payment = £180)
"Car Finance deal which is about 500 a month" (makes your credit commitments £680pm even before new loan is taken into account)
"no mortgage" (this is a good thing for you but not lenders who can't see how you would maintain a large debt)
"The purpose of the loan was home improvement and to clear the card" (Debt Consolidation, lenders will assume you will take the loan and not pay the card off)
Why take another loan to pay off the CC's if you have savings? Pay them off, take the loan for the HI's that you need, replenish savings with the money not being paid on CC's or a higher loan....
Thank you all for for your replies.
The savings are something I've always had as an emergency fund. Six months salary saved just in case. It's not money to use then replenish. It's a life raft. It isn't something I ever factor into an equation. I just mentioned it to indicate that I'm not penniless. Not rich either.
The savings are something I've always had as an emergency fund. Six months salary saved just in case. It's not money to use then replenish. It's a life raft. It isn't something I ever factor into an equation. I just mentioned it to indicate that I'm not penniless. Not rich either.
arkboy said:
Thank you all for for your replies.
The savings are something I've always had as an emergency fund. Six months salary saved just in case. It's not money to use then replenish. It's a life raft. It isn't something I ever factor into an equation. I just mentioned it to indicate that I'm not penniless. Not rich either.
If you pay the CC off then you'll get the loan and can use the cards in case of emergency whilst you replenish the savings.........savings are all well and good but not if debts elsewhere are causing you issues...The savings are something I've always had as an emergency fund. Six months salary saved just in case. It's not money to use then replenish. It's a life raft. It isn't something I ever factor into an equation. I just mentioned it to indicate that I'm not penniless. Not rich either.
DoubleD said:
I watched a fairly recent Martin Lewis program where someone was in a similar situation, she had savings as a "just in case" His advise was to not get a loan and to use the savings.
Makes a lot of sense. With current rates, a loan will cost more than the interest you lose on the savings.So if your on 45k salary your take home should be around 2700 per month? Is the £1000 you mention free cash or is it used for monthly living expenses? Shopping, Food, Socialising?
If thats the case then the bank must be worried about your affordability to take on another 11k loan with all the existing debts and finance you have and make the repayments per month.
If you have a few months savings you must have enough to clear the credit card?
If thats the case then the bank must be worried about your affordability to take on another 11k loan with all the existing debts and finance you have and make the repayments per month.
If you have a few months savings you must have enough to clear the credit card?
arkboy said:
I own my own home, no mortgage it's mine.
That's the issue I'll bet. I've heard of a few very solvent people being turned down for credit cards, loans, etc and the fact that they own their home outright and have no mortgage seems to be a common denominator.I had the same issue when I enquired about a car lease. They just couldn't cope with the fact that I owned my own home with no mortgage.
Challo said:
So if your on 45k salary your take home should be around 2700 per month? Is the £1000 you mention free cash or is it used for monthly living expenses? Shopping, Food, Socialising?
If thats the case then the bank must be worried about your affordability to take on another 11k loan with all the existing debts and finance you have and make the repayments per month.
If you have a few months savings you must have enough to clear the credit card?
I don't know if OP has one, but between pension and student loan I (just) clear £2,200 a month with a basic of £45,000.If thats the case then the bank must be worried about your affordability to take on another 11k loan with all the existing debts and finance you have and make the repayments per month.
If you have a few months savings you must have enough to clear the credit card?
ETA: even without those net after tax would be just over £2,440.
marshalla said:
Makes a lot of sense. With current rates, a loan will cost more than the interest you lose on the savings.
That's true all the time. It's how retail banks make money!OP should pay down the 6k CC debt. Utter madness not to.
Spunking 500 a month on a car (nearly 20% of your take-home income) is also insane, I hope it's something exotic!!
walm said:
That's true all the time. It's how retail banks make money!
OP should pay down the 6k CC debt. Utter madness not to.
Spunking 500 a month on a car (nearly 20% of your take-home income) is also insane, I hope it's something exotic!!
With no mortgage? Don't see 20% as particularly insane (assuming no rent / no saving for a future mortgage.)OP should pay down the 6k CC debt. Utter madness not to.
Spunking 500 a month on a car (nearly 20% of your take-home income) is also insane, I hope it's something exotic!!
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