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Line Of Credit Application

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RLFLOWS
Valued Member

Line Of Credit Application

I recently applied for a line of credit with a Northern California credit union. A rep called me after I applied online & asked what the LOC was for. I told her debt consolidation but actually I wanted it to pad my utilization. By telling her what I thought she wanted to here she stated that I would have to close my credit cards if approved. I told her to cancel the application. Is this a standard question to be asked? 

Message 1 of 8
7 REPLIES 7
fury1995
Valued Contributor

Re: Line Of Credit Application


@RLFLOWS wrote:

I recently applied for a line of credit with a Northern California credit union. A rep called me after I applied online & asked what the LOC was for. I told her debt consolidation but actually I wanted it to pad my utilization. By telling her what I thought she wanted to here she stated that I would have to close my credit cards if approved. I told her to cancel the application. Is this a standard question to be asked? 


Yes, specifically for the very reason you stated here. A LOC isn't necessarily the product, it's the interest accrued from use of a that LOC that is the product. Underwriters have heard it all from applicants before and they do track performance (loans approved vs utilized). Using a different reason would most likely yield a different response such as a major event coming up, planning travel, improvements to your house etc.

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Message 2 of 8
JoeRockhead
Senior Contributor

Re: Line Of Credit Application

As you found out it's generally never a good idea to list debt consolidation as the reason for use or desire to have the loan. Many people would think it's a good thing. Unfortunately, it's simply not looked at in a favorable light by lenders as it signals trouble in your finances, or the management of your finances. I'd agree with @fury1995 that you could have told them a multitude of other uses, such as you were planning on refurnishing your home, going on a bucket list vacation, etc... 

Message 3 of 8
markbeiser
Established Contributor

Re: Line Of Credit Application


@JoeRockhead wrote:

As you found out it's generally never a good idea to list debt consolidation as the reason for use or desire to have the loan. Many people would think it's a good thing. Unfortunately, it's simply not looked at in a favorable light by lenders as it signals trouble in your finances, or the management of your finances. I'd agree with @fury1995 that you could have told them a multitude of other uses, such as you were planning on refurnishing your home, going on a bucket list vacation, etc... 


I forgot which lender, but I was playing around with their pre-approval for a personal loan a couple of months ago.
When I put in that it was to consolodate debts I got a pre-approval for a lower dollar ammount, and higher interest rate, than when I put in that it was for an emergency expese!
Based on posts I've seen, and that experience, I've come to suspect that it is generally a bad idea to tell the lender that it is for debt consolidaion, though may be best in some circumstances.

I had no intention of taking the offer either way, as I was only a few days from closing on my HELOC.

Back to gardening until Late February 2025.

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Message 4 of 8
7774x
Frequent Contributor

Re: Line Of Credit Application


@fury1995 wrote:

@RLFLOWS wrote:

I recently applied for a line of credit with a Northern California credit union. A rep called me after I applied online & asked what the LOC was for. I told her debt consolidation but actually I wanted it to pad my utilization. By telling her what I thought she wanted to here she stated that I would have to close my credit cards if approved. I told her to cancel the application. Is this a standard question to be asked? 


Yes, specifically for the very reason you stated here. A LOC isn't necessarily the product, it's the interest accrued from use of a that LOC that is the product. Underwriters have heard it all from applicants before and they do track performance (loans approved vs utilized). Using a different reason would most likely yield a different response such as a major event coming up, planning travel, improvements to your house etc.


Always pays to be  vague .. ..I too got a LOC from credit union that  asked  purpose .. I said LOC  for home improvements ...  end of story

Message 5 of 8
RLFLOWS
Valued Member

Re: Line Of Credit Application

How can you ask for a LOC using home improvement as a reason if you're not a home owner?

Message 6 of 8
Rogue46
Established Contributor

Re: Line Of Credit Application


@RLFLOWS wrote:

How can you ask for a LOC using home improvement as a reason if you're not a home owner?


How do they know your not a homeowner?  The deed and mortgage for our house is in my wife's name but for all intents and purpose it's my house as well. I've never had anyone question that.





Message 7 of 8
Lou-natic
Established Contributor

Re: Line Of Credit Application

Both times in my life I have ever got a personal loan I used the "vacation" answer, was approved both times for the amount that I wanted with no further questions asked. This was a long time ago now but I used that because I really didn't think it was the banks business what I decided to use the money for. I certainly wasn't going to tell them it was for a lawyer/court cost on a reckless driving/racing/speeding ticket...lol

(for what it's worth I wasn't actually racing anybody, don't get yourself in a tizzy)

 

But yeah, no way I'd tell a bank I need them to loan me (more) money so I can give it to other banks to pay them money I owed...seems like a bad idea on its face if you spend even 5 seconds thinking about it.

 

 




3/4/23



Message 8 of 8
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