Why was my loan refused??

[ladyvivienne]

HSBC - wanted to up my current loan a little to finish off our house renovation (by 10K if that matters - total loan value still under £20k)

It's been rejected.

Phoned HSBC they've said it's not them its the underwriters - and gave me all 3 details and phone numbers so I could 'find out why'

All 3 agencies have come back and said there is ZERO problem with my information. Experion suggested I close an old credit card that wasn't being used but said other than that literally nothing showing.

What now?!

I seemingly have 'bad credit' yet the agencies say I don't!

Thanks @TeaKitten. I missed that particular update from the OP. Obviously he is liable if it's a joint loan.

I earn £30k. Joint loan is currently £6k which weI wanted to up to £16k. Car loan is £17k. £17 + £16 = £33k.

Car loan is in my name.

Joint loan is that - joint, both names on the £6k.

DH takes home between £4k and £5k a month.

A lot of credit is 'jointly and severally liable' which means that if one of you stopped paying they'd come after the other one.

They don't just look at how you share money now, but also how it could change in the future.

But you currently have a big and recent loan for a car, and are now looking to nearly triple another loan you have, while it's still running.

All in a cost of living crisis when bills, and other costs have risen and default rates increase.

Hindsight is a wonderful thing but their algorithm will be telling them that you're bad at budgeting and prioritising your money.

Why did you buy such an expensive car when you need flooring and a new kitchen, their computer will be asking?

You could always sell the car and buy a cheaper one and use the money freed up to pay for the work on the house.

Then, as you don't have the extra loan, you'll be able to save up to upgrade your car again in the future.

What's happening here is that you're seeing the economy in action. They've raised interest rates and tightened credit availability to encourage or even force you by cutting you off and saying no, to stop spending and save instead.

Your asking Mumsnet why your loan has been declined! I'm not sure what you plan to achieve from this thread op!

Unsecured lenders don't like debt to income going over 50%

It will be the car loan - that is over 50% of your income so will have led to the decline

If your husband earns that much can he apply for a 10k loan in his name?

Why are you in so much debt when your income is so high?

Also saving £400 pcm while simultaneously paying £570pm+ in debt repayments is madness.

If the £6k was for home improvements but now you realise those improvements will cost £16k that's really poor financial forecasting.

If I was the decision maker I wouldn't lend to you. You need to demonstrate better budgeting skills!

They won't care about your "whole pot" approach if you have a £17k car loan in your sole name. You are the only one liable for it, so it's your affordability which is affected.

I'd just get husband to apply elsewhere in his sole name if necessary. You seem to be accruing a lot of debt with a reasonable joint income though. Is that wise?

Perhaps they're just restricting credit which means you can borrow less.
Clear debt and save. It's the new borrowing.

this is a bit confusing. HSBC don't have to lend you anything and don't have to justify why. An underwriter isn't the credit agency. I really can't believe that someone at HSBC told you to called the credit agency to ask them why HSBC won't lend you money. You can have a perfect credit history and they don't have to lend to you.

You will never know what their exact criteria are.

Why are you in so much debt when your income is so high?

Also saving £400 pcm while simultaneously paying £570pm+ in debt repayments is madness.

If the £6k was for home improvements but now you realise those improvements will cost £16k that's really poor financial forecasting.

If I was the decision maker I wouldn't lend to you. You need to demonstrate better budgeting skills!

We are not in 'loads of debt'. I have almost zero credit card debt, it's one car loan. Most people have that.

The house loan was alongside buying this property as we were only allowed to borrow the exact cost of the property and it was a complete wreck. We're near the end of the build and realise we need £10k more to finish off.

Have you never renovated? My point about saving £400 a month is that I easily have the money to pay the extra £80 a month on the loan. That's the madness part!

If your husband earns £4-5k a month why was the car loan for his car taken out in your name when you earn so much less?

It is this that has impacted the credit rating. Further can the existing loan which I assume is on a low interest rate be extended? Are you sure they didn't look at ot as a new separate loan with current higher interest rates?

Yes I've renovated. I know what it's like to live in a wreck!

If you haven't got the patience for a building project don't buy a house that needs so much work or rent while renovating.

Your combined income is almost £7k pcm. Some people have this to live off all year. If you can't budget on that you are poor at budgeting. The bank is telling you this.

You have a lot of debt. If you can't afford to buy a car outright you can't afford that car! Prioritising a new car over important renovations is foolish.

Maybe seek out some financial coaching?

Do you really think "most people" have nearly 20 grand in car loans?

You taking out the car loan is definitely the reason.

You’ve taken on a significant amount of debt (in your name only). The bank won’t know, or care, about your joint pot approach. They will be softly stress-testing your finances and trying to avoid you not being able to pay for higher levels of unsecured debt (cars, loans for renovations etc are all unsecured debts).

Yes, it’s annoying when you think “but I can afford this right now”. They are looking at the situation as “you might not be able to in 6 months time”. What if one of you falls ill or loses a job? The lenders will factor all of this, and more, into deciding an acceptable level of unsecured debt.

Christ. It's a cheap car, bottom of the range small car. Yes, most brand new cars on the roads ARE on finance. That's mostly how it works. Our other car is a 20yr old banger. We live in the country and need at least one reliable car . Husband was working abroad when we bought it, mine had died (15yr old vehicle) and we were both sick of £1k here and £1k there coming out of the account for car repairs. £250 a month reliable car, job done.

I can't afford to buy a second hand car £6k + outright no. Because all of our spare cash has been ploughed into the build.

Yes but most people don't have a brand new car. You can get finance for second hand cars - you didn't need to spend £17k on one.

You've got lots of debt - you don't seem to think that's the case, but it is. The bank think that's risky and I don't blame them. If they'd approved you then you'd have more in debt than you earn in a year.

17k is 100% not a cheap bottom of the range car! Come off it. Huge difference between a 6k used car and a 17k one. Given all the feedback you’ve received here it’s probably time to consider that some of the posters are right, it’s because you’ve already borrowed a lot in a relatively short space of time. You have a lot of debt currently, which isn’t a disaster it just makes you undesirable to lend to right now.

@ladyvivienne if it's bottom of range then it's a very new car indeed . We had £17k finance on our car and have a 6 year old Volvo XC60 -

The thing is they can see all what you have on credit- including car finance , and usually don't want to go over a total amount , especially when you have very recent high levels of credit- it's automated and that's how they see it- they also want to see at least 6 to 12 months of payments being made on that credit on time.

It's the same with if you have loads on credit cards- if you have say 3 cards all up max- You will struggle to get loans or new cards.

The cheapest new car absolutely is that price.

The cheapest peugeot you can buy new on finance for eg. from £20,610. That wasn't what we bought but you get the idea. Small new car. Tbh shocked me too, definitely not the days of buying a brand new one for £11k anymore.

It was brand new. Bottom of the range 1 litre car basic, with no extras. As I said, the important bit was being able to afford the monthly repayments, which we can very easily. You're right though, my choice was to buy new as I needed reliability for my disabled child. We live rurally and simply cannot afford to be in a position of not having a car, there is zero public transport.

We don't have loads on credit cards. At all.

Will simply have to wait two years for the outstanding car credit to be down to £10k I guess and see where we are then.

@ladyvivienne Yep it's unfortunate but the minute the system sees a newish £17k loan it doesn't identify - oh it's a car - it just thinks £17k loan and she now wants another £10k and computer says no. I wasn't trying to be judgemental by the way - just realised it had to be a 'new' car and yes I can see your reasoning .

This kind of thing is why people end up remortgaging or taking secured loans in their house (always risky as if you default they can make you sell your house )

I think you will be ok after 12 months if your car payments are all fine.

Do you qualify for a motorbility car op? Just saw you referenced a disability. That could help??