Question on extending loan term to reduce monthly payment Pineapple12

#1
Hi,



I'm sure this type of question has been asked before but I couldn't find anything - apologies if there are already threads on this topic!



I took out a loan with Sainsbury's last September of £11,500 for 5 years. The monthly repayment amount is something that I can manage but only just - as I have had to relocate to somewhere more expensive and I'm concerned that I will end up having to spend more on my credit card if I run out of cash before next pay day rolls around again. I am really trying to only spend with cash and only use my credit card for work travel expenses (so that i can repay the amount in full and hopefully boost my credit rating). I really don't want to get into credit card debt again and I fear that this is where I might be headed down the line.



My question is; if I were to ask Sainsbury's if they could potentially increase the term of my loan and therefore spread the payment costs out so that the monthly amount is more manageable for me, would that affect my credit score? I wouldn't want to ask the question only to be told no and have my score take a hit. I can't seem to find the answer on their website and I can't seem to find a definitive answer anywhere.



Any help would be much appreciated!



Oh - and I do understand that increasing my loan term would mean I would pay more interest overall.



Thanks!

#2
The credit score that only you can see? The credit score that no lender uses? Who cares?



If you are going to change the term to reduce the monthly repayments make sure it's done as a new loan with the current loan account being shut down. If you don't then it's possible that Sainsbury's will treat it as a debt management plan which could lead to negative markers on your credit report (that's what lenders see not the score). Also be prepared for Sainsbury's to offer you a different rate.

#3
Unlikely they will extend the term without it affecting your credit rating. More likely they will offer you a new loan but the terms will probably not be the best as the risk has now become higher.

#4
I would very strongly recommend against saying anything to Sainsbury's which could create the impression that you are experiencing difficulties with making the repayments.

Your statement that you are really trying to only spend with cash and only use your credit card for work travel expenses so that you can repay the amount in full and hopefully boost your credit rating makes no sense. Spending using the credit card which would otherwise have been spent in cash means that the money stays in your bank for a few weeks earning interest and in no way affects your ability to repay the credit card in full. Spending and repaying in full more each month on the card would probably be beneficial to your credit rating.

Your loan term is already 5 years. Increasing the term beyond that would probably not bring about any significant decrease in the monthly payment but would very significantly increase the amount of interest that you are paying overall.

#5
It won't just increase the amount of interest you pay. It will increase the interest rate charged.



You need to take action to reduce ALL other costs in your life and stop using cards and loans as a form of income.

#7
Start a spending diary to account for every penny you spend. I bet you will find you can make savings by cutting back. It's all the little things that mount up, a daily coffee, buying lunch, etc. Look for cheaper alternatives. I would try and keep up the repayments as they are, and not look for excuses that your cost of living has gone up.



You say you are worried that you might end up spending more on the credit card if your cash runs out. Simple answer to that is the spending diary, make sure that your cash does not run out, live within your means. Allocate a daily allowance and stick to it.

Ilona

#8
I would think that if you applied for your loan last September, the rates would have been higher than they are now. I would suggest that if you are wanting to refinance with them, that you ring and ask for a settlement figure as you want to get a cheaper rate. They should suggest that they quote for a new loan and at that time you can suggest changing the term ("what would happen if I did it over an extra 6 months ..." sort of thing). They'll base the loan on your settlement figure and will know automatically that your new loan will replace their old as they are sorting it internally ... you don't receive any money that you then have to pay back to settle.





There is a risk that you'll get offered a poorer rate than you are on, but I would think you should be OK unless something untoward has happened to your circumstances.





As suggested, make sure you keep everything positive with them on the phone. Remember, you're just trying to get a better deal ...





Good luck!

#9
My advice would be to get a settlement figure on your sainsburys loan, then shop around for a new loan for that amount at today's rates with a longer term (e.g. Tesco, mainstream banks etc)



If you get one, then simply settle the sainsburys loan with it and pay the new one instead.



Telling sainsburys you're having some difficulty paying is asking for trouble. They can ask for the outstanding amount to be repaid immediately if they think there's a chance of you defaulting.



And if they offer you a new loan the interest rate will probably be higher due to you being more risk.

#10









Telling sainsburys you're having some difficulty paying is asking for trouble. They can ask for the outstanding amount to be repaid immediately if they think there's a chance of you defaulting.



.
Originally posted by bearcat16


This is wrong in my opinion. They could ask for an overdraft to be repayable on demand but not a loan.



I would agree that getting a new loan over a longer period is the way for the OP to go but banks absolutely love customers like him - they will make so much money out of him year in year out.

The only way to break the cycle is to repay what you owe and keep it that way or if you need credit do it on zero % cards and make sure it is paid off before the expiry of the promotional period.

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