Personal Loans etc as a contractor - hassle getting them?

[psychocandy]

Yes, I know before anyone says I dont need a loan I should be paying it off.....

Savings/warchest going nicely and also paying off credit card debts too. But I dont want to commit too much to one or the other.

Got a garage conversion planned. Mrs will be using partly for her own small business so will make some money back there in extra income etc.

Also, loan rates seem to be as low as 6% which aint a great deal to pay back. Something like £20 a month interest on £7500 over 5 years.

That way rather than hike £7500 out of my warchest, its still there siting in my ISA gaining 3%. So probably all in all the loss is £12 a month or so with the advantage of having the cash available to me in case of emergency.

In terms of getting loan, any hassle with being contractor? I know these loan companies (like everyone else) dont really understand things but do you just put yourself down as full time employee (which you are of you're own company)? Best not to put £7K salary I guess but income inc dividends?

[SueEllen]

The easiest way is to go with a company - remember lots of financial companies are linked to one another - that you have some sort of good financial history with before.

[Wanderer]

Hey, I know. Give the bank your savings, they will pay you 3% interest on it and then lend it back to you at 6%. So that way you can pay 3% (net) interest to the bank for the bank for the privilege of them holding onto your money for you.

I could never understand that logic.

[kingcook]

Something like £20 a month interest on £7500 over 5 years.

Seriously... how long would it take you to earn £7500?

Don't go to the dark side!

[psychocandy]

Hey, I know. Give the bank your savings, they will pay you 3% interest on it and then lend it back to you at 6%. So that way you can pay 3% (net) interest to the bank for the bank for the privilege of them holding onto your money for you.

I could never understand that logic.

Well, yeh, obviously doesnt make sense and I know its going to cost more.

Look at it another way. If I take the £7500 out of my warchest, then thats £7500 less in my warchest. At the moment, dont like to take warchest below 6 months worth of money which this would.

Look at 2 scenarios,

1. I take the money out of warchest, leaving, say, 4 months money in there. Contract gets canned. Bugger. Wish I had that £7500 available now.

2. I leave it in there. Get a loan which costs me £15 net in interest a month. Got 8 months warchest now. Contract gets canned. Yes, I'm paying out a little more each month but its still going to last longer.

Of course, obvious best solution is to wait, save the money and then spend it. But, like I said, Mrs runs a business and needs a home salon now which will be of benefit to her income anyway. (and with plan 2 it'll cost me £15 in interest..... = worth it).

Other option which generally I'm never keen on (because you end up paying loads because of the longer term) is to borrow more against the house. I'm in fortunate position where there's loads of equity in house (yep, I bought a 4 bed detached from new for £115K and its worth over £200K now even with the recent drops) and even better I'm on a tracker rate of Base+0.75%. Cant see them giving me same rate for additional borrowing mind!

But, since its for home improvement which should add value I guess them I'm more open to it long term.

[psychocandy]

Seriously... how long would it take you to earn £7500?

Don't go to the dark side!

Well, its prob one extensions (3 month) worth of spare income.....

Dont get me wrong I'm never one for relying on loans but dont discount if it works to your advantage. Like I said, business plan for Mrs business is to get a home salon going so call it an investment. ;-)

Anyone want botox? Cojak perhaps?

[psychocandy]

The easiest way is to go with a company - remember lots of financial companies are linked to one another - that you have some sort of good financial history with before.

Yeh, possibly you're right.

I remember even as a permie, over the last few years, companies tend to turn you down for credit at random anyway - never understood how that worked. Guess being TEMP (as credit companies see it) makes it even more hassle.

I remember getting turned down for some crappy store card once. I only wanted it for the 20% discount with plan being to buy the item, pay off card, then chuck. Got turned down for £1000 credit or something. Load of bollox. So in the end just paid with my platinum amex.

[jmo21]

<snip/>
Also, loan rates seem to be as low as 6% which aint a great deal to pay back. Something like £20 a month interest on £7500 over 5 years.
<snip/>
In terms of getting loan, any hassle with being contractor?

Try Zopa, you might get an even lower loan rate.

Not sure if it will be easy for a contractor to get one though.

[northernladuk]

Yeh, possibly you're right.

I remember even as a permie, over the last few years, companies tend to turn you down for credit at random anyway - never understood how that worked. Guess being TEMP (as credit companies see it) makes it even more hassle.

Companies do not turn you down at random. There is no such thing as a global credit score anymore, each product is aimed at a certain market and if you do not fit the criteria you won't get it. There are cards aimed at people with average credit history that you will not get if you have a spotless one (which is highly frustrating). They aim to make certain amounts of cash from this product and someone who has paid it off every month and never incurs interest isn't right for that product.

I remember getting turned down for some crappy store card once. I only wanted it for the 20% discount with plan being to buy the item, pay off card, then chuck. Got turned down for £1000 credit or something. Load of bollox. So in the end just paid with my platinum amex.

So they will have looked at your history and decided that is exactly what you are going to do so declined you. Someone who is up to their eyeballs with store cards and pays lots of interest on them may have got it.

Getting turned down also sits on your credit record. Go get your reports from Experian and Equifax and go through it with a fine toothed comb and question anything you don't agree with. Having too much credit available but not used is one of the biggest mistakes people make. Companies are cautious about giving you credit when you are potentially in the situation to use all the credit you have and can't pay back for example.

[psychocandy]

Companies do not turn you down at random. There is no such thing as a global credit score anymore, each product is aimed at a certain market and if you do not fit the criteria you won't get it. There are cards aimed at people with average credit history that you will not get if you have a spotless one (which is highly frustrating). They aim to make certain amounts of cash from this product and someone who has paid it off every month and never incurs interest isn't right for that product.



So they will have looked at your history and decided that is exactly what you are going to do so declined you. Someone who is up to their eyeballs with store cards and pays lots of interest on them may have got it.

Getting turned down also sits on your credit record. Go get your reports from Experian and Equifax and go through it with a fine toothed comb and question anything you don't agree with. Having too much credit available but not used is one of the biggest mistakes people make. Companies are cautious about giving you credit when you are potentially in the situation to use all the credit you have and can't pay back for example.

Yeh. I guess thats the reason.

I think too much credit could be my problem sometimes. Scary amount of limit on my amex for example. I guess if I used up all my credit then I'd be mega screwed to be honest. Dont even think my contract income could pay that back!

I have got the experian thing in the past and gone through and specifically cancelled credit card accounts that I'd forgetten about and hadnt used for years.