Seeking a large personal loan

I am currently a highly qualified professional but am seeking a career change. I am looking to borrow €90,000 travel overseas to complete a training course for a period of 10 months to 1 year. I own a house in Ireland and will be renting it out while I am away to cover my mortgage costs. While I am away I will have no other income since I cannot work in the country I am travelling to. Therefore I am looking to keep my loan repayments as low as possible during this time.

The training course I wish to complete would render me highly employable. But even if this course doesn't work out, I would have no trouble getting work when I get back to Ireland in 1 year.

Has anyone got any tips on where to start? I realise that the majority of banks only offer a maximum €35k on personal loans. Will any financial institution touch a person who is leaving the country and who will have no income for that period?

Could you look to increase the mortgage on your property based on equity to cover the 90k? The first active refer to it as a top-up.

Sounds unlikely to me. I would expect a lender to look for security on a loan that size and when the borrower is leaving the country/juristiction.

Don't forget that converting your home to a rental property while you are abroad may give rise to tax (e.g. stamp duty clawback, income tax on rental income, CGT on eventual resale) and other (e.g. lender may need to be informed, alternative insurance may be required, owner occupier mortgage interest relief may not be claimed etc.) implications.

You're not thinking of training to be a pilot by any chance?

Clubman, I think the top up on the mortgage MIGHT be a possibility - it obviously depends on the LTV and expected rental return but the property might be accepted as security.

Other than the "top up" the options are limited - no bank in their right mind is going to give €90k in an unsecured loan; if you do have any other security ie shares / investments / SSIA's (I know they can't be used as security against a loan but there may be some way around it) the banks may lend on a small multiple of the value of the security. I got a short-term loan for €80k based on €25k security two years ago, but and this is important, I had a very very good relationship with the bank and personal recommendations from inside. Also, if requesting the loan ask for the interest to be payable on termination and not monthly - unfortunately this may increase the rate slightly as there is a greater downside to the bank if you default.

Is there any possibility of somebody else going guarantor on the loan - a parent or a rich aunt etc?

Is there an association based in Ireland for the new career path? If there is maybe make contact with them to see if anyone else has a solution for your problem or others have been in the same boat.

Finally, what is your relationship like with your bank? Have you been a good customer, do they know your face in the branch? All these things help when looking for non-standard loans.

efm

efm said:

Clubman, I think the top up on the mortgage MIGHT be a possibility - it obviously depends on the LTV and expected rental return but the property might be accepted as security.

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Yes - but the original query was about personal loans which presumably means unsecured loans. Obviously a mortgage top-up payable over the same period of time of an equivalent personal loan rather than over the full term of the mortgage would be a good idea but I just assumed that this was not an option seeing that it was not mentioned.

I got a short-term loan for €80k based on €25k security two years ago

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Why did you not use the savings and borrow only €55K instead? In general it does not make sense to maintain savings while borrowing.

Also, if requesting the loan ask for the interest to be payable on termination and not monthly - unfortunately this may increase the rate slightly as there is a greater downside to the bank if you default.

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That would increase the cost of borrowing significantly I'd imagine.

Thanks for your detailed responses. I really am a novice in this area so all of your advice is much appreciated. I'll try to respond to each of your queries.

Casiopea
I had looked into a mortgage interest alright. However, I have only just started paying back my mortgage and, although the house value has risen since I purchased, the difference between what I owe the bank and what the house is worth is only about 60-70k. So would this not make it difficult to push out the mortgage increase to 90k?

Clubman
Hadn't thought about stamp duty clawback and alternative insurance. These are the type of things that I need to start allowing for, so thanks!
As regards getting a personal loan as opposed to a mortgage increase, I thought that I would have to opt for the personal loan based on the shortfall I mentioned above. Other than that, if a mortgage increase was possible, and made most sense financially, I would definitely opt for that.

Efm
Firstly, good guess! Secondly, I have an SSIA which will mature in 2007 to a value of approx 15k so I suppose there is a possibility of some security there. There is a possibility of a parent going guarantor but I really woudn't like to lump them with the full 90k. Is it possible to use the house as security for part of the 90k and a guarantor for security for the short fall? As regards the relationship with bank, it is quite good and the manager is a second cousin of mine so that might help. I have done all my banking with them for the past 15 years and have never had any problems. I plan on going in for a chat this week so I was just hoping to have some idea of what to ask expect and what to ask for in advance.

Top up your mortgage for the max possible - that will leave you in a much better position to work on the remainder. Note that you can't use your SSIA as security for any loan (this was part of the conditions that you signed up to when you opened the SSIA account).

Clubman,

I thought you were replying to casiopea's post on the top up when you replied "Sounds unlikely...." Still, it is good to have all the options discussed.

As for my short term loan - the security was equities not cash - transaction costs and tax (CGT) would have made liquidating and re-investing 6 months later more expensive than the added interest on the €25k.

Also, as for paying interest in one lump sum at the end of the term of the loan, the difference in my experience isn't huge, and in many cases there is none - obviously this is a non standard transaction so each is different and a lot will depend on your credit history, relationship with the bank, repayment capacity etc etc

Donalorian,

I know a couple of lads that went down the pilot route and I remember them telling me the cost was around the €90k so that's why it stuck in my head!

I presume you have checked out http://www.pprune.org/forums/ for the low down on what’s happening in the exciting world of crate monkeys (pilots!!!) - I presume you have done the research on the job market and prospects before making the jump - it's going to be difficult to get your first job - no commercial airline will take you because you don't have the hours so you could end up having to go the Freight Dog route to get the hours and type qualified - if you are willing to be based anywhere your chances are much better.

One of the guys I know went to the states, got the qualification, then spent 12 months looking for a job - finally got one flying a cargo route from the UK to Frankfurt and since got a job flying a corporate Gulfstream in Europe for some US company - he's beginning to be well paid but he's not yet on €100k per annum; but that could be just him!!

Back to the matter at the hand - the money. If you have a good relationship with the bank it should help - hopefully the bank will look at your overall asset worth, earning potential, outstanding debt when discussing options - technically I wouldn't see any reason for the bank not to allow a top up for some of the money and a personal guarantee for the rest. As another option would it be possible to negotiate some sort of mortgage holiday, probably not for 12 months but maybe for 4 or 6 that might help.

Finally, make sure you have as much info with you as possible - an exact breakdown of how much you need, why and what for, ie €50k for course and €25k for living expenses, flights, insurance; also have an exact figure of your outstanding mortgage amount and expected rental income, including examples of properties in your area rented out; in other words do your homework and show the bank you are serious.

Also, I just thought, I wonder would it be worth it to re-mortgage the property on an interest only basis thus reducing the repayments and then you could use some of the surplus rental income towards the €90k.


Let us know how you get on and let us know when you qualify on 737's so I can make sure to change flights!!!!