It's easy to compare and buy loans over the Internet, especially through The Fool. But here's what to do if you keep getting turned down for the best deals.
Too often, people who have a great track record of paying their bills get turned down when they apply for cheaper credit. This may be because they're 'too good' at paying their bills on time so lenders feel they're not going to make any money out of them. It can seem like borrowers have no other options. However, here's a story that might help:
A relative of mine called up one of his card providers, Egg, with a question about his direct debit. After resolving his query (which involved a bit of disgruntled muttering from my relative), they offered to transfer his full credit card balance of more than £7,000 to a personal loan. This meant him switching from 15.9% interest per year down to just 7.9%. Nice! (Egg obviously wanted to keep him as a customer!)
Many of you will have Egg cards. However, persuading lenders that you're worth keeping on should work for other credit card companies too. If applying online isn't working for you, give this plan a go:
Get your facts together
Before you call, collate all your financial paperwork, so you have details of your income and expenditure to hand. Also, work out how much you'd prefer to pay and over what period. To do this, you can use our Foolish loan calculator. When the loan provider asks about payment terms, you'll be able to tell them the monthly figure you want to pay and how many years you want to pay for.
Make the call
Call up your card provider on the usual number, and ask them if you can discuss a loan. When you get put through, tell them you'd like to transfer your card balance to a loan, and ask them what terms they'd offer. Egg, for instance, offers a typical rate of 7.9% APR and you can overpay or underpay without penalty. Any good Fool will be very glad to hear they can overpay while also having the option of underpaying in an emergency.
Egg, and other providers, will ask a lot of questions, which may include:
- What is your gross salary?
- What do you get paid after tax and pension contributions?
- On average, how much are your monthly bills? This includes mortgage/rent, gas, electricity, water, council tax, mobile phone and TV licence.
- What other direct debits and standing orders do you pay?
- How much do you pay each month to other lenders?
- How much do you have in savings?
- What is your typical bank balance the day before payday? Specifically, are you using an overdraft facility?
- Do you know what accident, sickness and medical benefits your employer offers?
It'll be reassuring for them if you are able to tell them all your outgoings accurately, but don't worry if you can't get all the details they ask for about sick leave, medical cover and so on. If you guess some facts or figures make sure they know it's a guess, so they can't accuse you of misleading them at a later date.
Lead them on
Whether you call Egg or another company, all of them will try very hard to sell you dreadfully expensive Payment Protection Insurance (PPI). Sometimes companies will offer you worse deals if you refuse PPI. They may even decline your loan application altogether. Therefore, the best thing to do is sound very interested in everything they have to say about PPI, right up to the time they offer you a loan.
When they've given you a monthly figure with PPI, ask them what that would be if you didn't take the ghastly insurance. (Make sure you just say 'ghastly' in your head, not out loud. There's no point stirring up a commission-earning representative's nest.) They'll then give you a much more acceptable figure. If you decide to accept the loan - without PPI, naturally - they will ask 'Why not?'. Invent any excuse. Perhaps you could say you think you can get the same cover for less elsewhere. Or say you're invincible and never fall ill, so you don't need it anyway. Anything. Just don't take the PPI!
More paperwork
Finally, they'll send a paper contract. All you have to do is read it and, if you're happy with it, sign and return it with the supporting documents they request. Typically, they'll want your last three bank statements but because you're great at paying your bills on time, you'll have them to hand, won't you!
> 7.9% is good, but you can get much better online. Compare personal loans and compare credit cards though The Fool.
> Get a credit report to see what you need to do to improve your credit rating.