Scenario is:

Loan applied for & accepted online with bank for X amount. Part of loan was to consolidate small amount of another loan with same lender (I know).

After 2 days, changed mind. Decided wrong loan and terms.

Bank “You can cancel new loan, but you’ll need to take out another NEW loan for the one you consolidated, at a shitty interest rate”.

Can they do that? I assumed the 14 cooling of period, would apply to all aspects of the loan, including the consolidation, which is with the same lender and was then cleared immediately (I don’t even have funds yet and loan account is now closed).

Anyone know if this is correct? Seems a bit wrong.

(I was offered to be transferred to ‘complaints’ who then refused to speak to me and told the poor chap I was speaking to, that as it wasn’t a bank error, tough tits. I felt for the lad that had to explain that to me, as he was flabbergasted himself!)

TA 🙁

So if I understand this, you’ve drawn down a loan, and part of that has been used to repay part of another loan?

I’d check on the conditions of repayment of that other loan as this is where the dispute is. Bear in mind that you still need to borrow money to cover the repayment on the original loan, and that is nothing to do with your new loan.

If you repay money on a loan, you can’t just decide to borrow it again on the same terms as the original loan. The bank has its money back in that repayment so will have loaned it out to someone else at a better rate, hence charging you to draw down something else to cover that payment.

I worked in RBS for 10 years but this really wasn’t my area.

It’s a difficult one, there is of course the cooling off period, but that’s not the same as a ‘like it never happened’ clause – after-all if you hadn’t had the old loan with the same provider you’d have to get the cash back.

As with all things bank related get a decent complaint in, in writing and don’t take the first ‘no’ and hope for the best.

It is tricky I agree, hence asking for advice.

I thought that the ‘cancellation’ would mean that things went back to how they were, i.e no loan for X amount and the loan that was consolidated, would just be re-instated.

Otherwise, if I cancelled loan, how would they re-instate the other debt? It just seem a bit odd? They can’t FORCE me to apply for a loan – does the other loan become an instantly repayable debt?

You can cancel the loan no problem, but that will leave you in default on the other loans that were repayed with the loan you want to cancel.

You can’t cancel the new loan unless the you return the full amount of the loan – that’s the part they can “force”.

If your intention is to find a new loan that better suits you I’d try to sort that ASAP, use the cash to cancel the unsuitable one – if your intention is to not take the new loan at all, complain /beg the bank for a better rate on the bit you need.

…and you really don’t want to be in default on a loan as it will stick on your credit file for six years, and you’ll only ever get offered shitty rates on any borrowing.

Don’t worry, the bank won’t allow a position of an outstanding amount of money without a finance agreement attached to it (basically making it unenforceable) nor can that register a default for this sort of thing.

Ah, cheers P-Jay, that makes slightly more sense.

I’ve got an approved loan for a better deal tonight (same lender weirdly – so much for sensible lending!)

So when I cancel loan 1, will they just say “ok, you now owe us X amount from consolidated loan”?

Seems a bit shitty but it might help if you imagine that the original, smaller loan had been with another bank/lender. You wouldn’t expect them to let you waltz in a couple of days after paying it off and saying, “nah – I’ve changed my mind”.

I’d be very surprised if the bank didn’t sort this out for you though.

PS – might also be worth checking whether that original loan had a termination cost.

If it’s all with one lender just ask them to sort the details but effectively you cancel the ‘wrong’ loan and accept the ‘right’ loan – you can either let them sort the consolidation or settle it when you get the money in your account.