Loans - How Do The Loan Providers Know What It's For?!

[buffymad]

Have been comparing loans online and noticed they ask what the loan is for - and that some of them will only allow a period of 5 years for debt consolidation, whereas home improvements are given 10 years. My question is ... once the money is in your hands, how does the loan provider know what you're using it for? I took out a loan years ago from my bank and they didn't check up afterwards what I used it for.

[hc4361]

They don't.

[buffymad]

So they don't check up afterwards and ask for receipts? Even if it's a secured loan? Seems daft them asking what it's for in the first place!

[fiction-factory]

They probably check your credit file before hand though and will be able to see from that what other loans you have and may guess that it is for a debt consolidation really or may just say no anyway if you have a other large loans

[hc4361]

A secured loan is secured to your home so it makes no difference to them if you use a car loan to pay for a cruise. The credotor can repossess your home just the same.

[ubasses]

If you are creditworthy the Bank is not interested in what the loan is for. I found most customers would volunteer that information when they came in. As Fiction-factory says as soon as the credit register search is done, it becomes known that there are debts and they may decline straight away. If you are with one of the major Banks and you have a debt with them, it would be looked at on an individual basis as getting you back 'on the straight and narrow' would be beneficial to them. Do not be surprised though if they ask you to take in your final statements and credit cards/accounts in debt, so that they can send the money direct and destroy any cards and get you to sign an authority to close down the accounts you are paying off. That is the way they ensure it is not spent on other things.