Debt consolidation loan rejected because I have an existing loan

[POPholditdown]

Hi

I’m just wondering if this is standard or if I should try other lenders..

I applied for a loan which I was planning to use to pay off my existing loan and credit card. My bank rejected it on the basis that I have an existing loan so it failed the affordability checks.

The advisor knew that I obviously wouldn’t have two loans (her words), but there was nothing she could do.

I have checked my credit rating, it’s good, no defaults. I don’t know whether to try other lenders or if they all have this policy now?

On the applications, where it asks for existing debts, do I include my current ones even if they won’t exist once if the new loan is approved?

I just filled in an app (not sent just to check the details) with another bank (the one my loan is with) and in the end it gives 2 options - either have the new loan in addition or add it to the existing loan amount. So with both options, it looks like I won’t afford the repayments. But I will, as I’d only have one loan and 0 credit cards!

Both times I have selected ‘debt consolidation’ for the loan reason.

I did this a few years ago to get a better interest rate once and I’m sure they didn’t think I would be paying two loans! Am I doing something wrong?

Credit has tightened up massively over the last few years, and it might not feel like it, but being refused a loan might be a good thing. Lots of people, myself included, have a taken out a loan to 'pay off' debt, only to get into a bigger mess down the line, with a loan and credit cards that have been run up again because we haven't learn't to budget properly or not spend money we don't have.

Do you know why you are in debt and can't seem to get out? WHat was the original loan for? Have you done a proper, sustainable budget to work out if you can really afford the loan?

Have a look at the budgeting advice from moneysavingexpert and forget about more loans until you know, rather than hope, you can pay them back

www.moneysavingexpert.com/banking/Budget-planning

Thanks for the reply.

You’re right it probably is a good thing in the long run. The total debt at the minute is around 10k (1700ish on CC) so I essentially just wanted to top the loan up. The repayments would actually be less as I wouldn’t be paying the CC separately, and the quote I received was a few £ more than my current loan repayment.

It’s a bit shit as I never wanted a card but I had an emergency (house stuff) last year.

I think I’m just being impatient as the credit card amount never seems to go down by much! Whereas a decent chunk of the loan is paid off every month so I can see that debt going down iyswim.

My bank rejected it on the basis that I
have an existing loan so it failed the affordability checks

Pretty standard. You’re wanting to double your debt so unless you can meet affordability checks you won’t be approved.

The advisor knew that I obviously wouldn’t have two loans

But that’s the thing, you would have 2 loans, hence why you failed the affordability checks. You have told the bank you want it to consolidate your debt, but once the loan has been paid to you there’s nothing stopping ou spending it on cocaine and bookers, if you do choose!

I agree with BoS’s post above. I don’t mean to be patronising but it really doesn’t seem like you have a good relationship with debt. Despite good intentions, consolidation loans statistically, rarely, lead to the applicants clearing all their debt in the near future, people just run up the cards ect and end up in worse situations than they were in, in the first place.

Head over to the money saving expert forums and visit the “debt free wannabe” pages. The posters there are fantastic at advising how you can best clear your debt and sort out your finances.

Good luck!

But you said you did this a couple of years ago too?
Consolidating two years ago did not solve your debt problems, consolidating now won’t either. You need to take a good hard look at your spending, and prioritise paying off the credit card ASAP.

Go to MSE and post a statement of affairs, they’ll help you trim the fat.

You don’t get out of debt by borrowing more money

Can you switch the credit card balance to a zero interest one to give yourself more space to repay it ?

there’s nothing stopping ou spending it on cocaine and bookers, if you do choose!

I completely get this is possible but I could have done the same a few years ago but they approved it.

Just to confirm, few years ago I didn’t borrow more on top, just changed who the loan was with and a shorter term, as it was a better rate meaning the total amount repaid would be a lot less.

Thanks Jenny I have thought to look into that I’m not sure if I’d get approved now that I was rejected for a loan. I think I’ll just leave it as it is, it’s manageable anyway, it was mainly to reduce my monthly outgoing and I could have used the extra to pay more off the loan or save.

Thanks all.

I didn’t get a debt consolidation loan years ago and it changed my spending for the better.

Are you paying the credit card by standing order or direct debit?.

@fluffy I just transfer money as and when I get the bill and sometimes I pay extra into
the account throughout the month.

www.mumsnet.com/Talk/legal_money_matters/1987219-SPREADSHEETS-for-Debt-Control-Budgeting-Mortgages-etc

If you set a standing order up of this months payment plus £1 the op who wrote these spreadsheets reckons you’ll clear it in record time.

There’s a frugal living thread in credit crunch. I’m always up for reducing living expenses.

fluffy thats brilliant! Thank you for showing it to me

Alas I'm only the messenger. TIP wrote them.

I wish I'd had them when I had cc.

I'm in a similar position OP, except my dept is only around 2k - my problem is most of it is stupidly against a catalogue account that I was ignorant to and now pay a staggering 59% interest rate against... I've tried to get a loan from my bank to consolidate this debt and the rest which was from a credit card (also to get out of a few hundred £ overdraft) I have a good credit score but because of the existing debt I was not approved.

I ended up doing the MSE comparisons and got a 0% balance transfer card (30 months), but tbh it hasn't helped my main problem as they only do the money transfer offers every so often so the catalogue debt cannot be paid till these are available. I have a very strict budget and every penny is accounted for, spreadsheets of spending, 'no spend' days - once the catalogue has gone I will finally have a light at the end of the debt tunnel

Sweaty

Interest free cards for spending are more common than interest free money transfer ones.

Can you get a 0% spending offer card (or the one you've just got might do this, I'm not sure) put your normal spending on the credit card, and just pay the minimum, and send the money you would have spent on food, petrol or similar to the catalogues and pay them down that way?

Maybe get ClearScore- it can help tell you what you’re eligible for without going through too many credits checks. Otherwise you’ll keep getting rejected if you have too many. What is your current APR? Can you overpay to clear the existing debt early and pay less interest?

If you felt comfortable securing the debt against your home you could look at a further advance on your mortgage. The interest rate would be lower.

Unfortunately once you have a certain amount of debt- especially on credit cards even with a consolidation the affordability flags up as it is essentially an unsecured loan.

You could look into balance transfers as a PP suggested.

@BarbaraofSevillle the card I got doesn't have spending offers, at least not currently, they have some balance transfers at present. I could just take the money out via the card instead of waiting for a money transfer offer but purchases from the card are only 0% for two months (my colleague has done the exact same thing 3 months prior so I'm not copying her mistake). It would be more sensible to wait for the money transfer offer to become available, hoping it's sooner rather than later