Small Loan advice

Zenduri · 16 Jul 2019 at 14:13

Just throwing this out there to folks of GD who are more financially wise than myself.

I have about £2100 of unsecured debt in the form of a credit card and overdraft and im considering accepting a loan I've basically been accepted for to clear it. The APR on the credit card is absurdly high and a relic from when I made some silly decisions and took out a high interest card to rebuild my credit rating at a point when my rating was shocking. Stupidly I actually maxed it out and with the interest I'm barely making a dent on it without maybe doubling the monthly payment (I cant clear it all in one go and I've been complacent with not actively clearing it in the past, my fault I know). The monthly overdraft fees Lloyds and bending me over for are stupid as well and I'm constantly in and out of my overdraft each month.

The total monthly cost in interest, fees and monthly payment on the credit card is about £130 a month and after doing a bit of math even if I doubled what I'm paying on the credit card in the long run I would still end up paying a stupid amount of interest.

As mentioned above I've been accepted for a loan for £2000 and just need to basically accept it myself. The loan is 7.9% Apr over 36 months which is £62 a month and the interest is about £248 for the period of the loan.

By my calculations I would save about £1200 on interest alone (at current repayment rate based on the time it would take to clear the balance, £600 on interest if I double payments) on the credit card and clearing and removing the overdraft would stop about £480 a year in fee. I could also pay £130 a month off on the loan to reduce interest and repayment time by 1/2. My plan would is to close the credit card and remove the overdraft facility to avoid this stupid **** again.

Looking for advice here not "op is **** with money" comments

Ukadder · 16 Jul 2019 at 14:16

What about new credit card with 0% balance transfer and no interest for xx months and pay that off? should be able to get a credit card with a £2K limit easy enough unless you're credit is terrible.

Zenduri · 16 Jul 2019 at 14:18

Its average according to experian.(790)

peterwalkley · 16 Jul 2019 at 14:20

I'm not seeing any obvious holes in your logic provided the new loan is also unsecured. Have you tried places like ratesetter to see if you can get an even lower interest rate ?

Two grand in debt isn't bad compared to some horror stories I've seen in the past, so don't beat yourself up over it.

touch · 16 Jul 2019 at 14:28

I'd agree with @Ukadder on getting a 0% credit card. Even if you cant get one with a high enough limit to pay off the full balance on the old card, just transfer as much as you can.

kindai · 16 Jul 2019 at 14:35

Going to suggest the loan.

OP is obviously **** with money (sorry, had to be said).

Should get a loan, wipe out the card and close the account so you dont get tempted to spend on it.

That way you have a solid structured way back to zero.

touch · 16 Jul 2019 at 14:50

kindai said:
Going to suggest the loan.

OP is obviously **** with money (sorry, had to be said).

Should get a loan, wipe out the card and close the account so you dont get tempted to spend on it.

That way you have a solid structured way back to zero.

You only need the self-control for a week or so to get everything set up and you're sorted.
After the balance transfer, you can cut up the card and bin it then you wont be able to spend more on it however tempted you may be.

Zenduri · 16 Jul 2019 at 15:12

peterwalkley said:
I'm not seeing any obvious holes in your logic provided the new loan is also unsecured. Have you tried places like ratesetter to see if you can get an even lower interest rate ?

Two grand in debt isn't bad compared to some horror stories I've seen in the past, so don't beat yourself up over it.

New loan is also unsecured

Maccy · 16 Jul 2019 at 15:13

Try for a 0% balance transfer card first, even if it's only for 24 months?

Zenduri · 16 Jul 2019 at 15:14

touch said:
I'd agree with @Ukadder on getting a 0% credit card. Even if you cant get one with a high enough limit to pay off the full balance on the old card, just transfer as much as you can.

I applied for a few 0% cards 9 months ago and got turned down. I have no black marks on my file, just an average ish rating

styuR · 16 Jul 2019 at 15:31

HybridX said:
I applied for a few 0% cards 9 months ago and got turned down. I have no black marks on my file, just an average ish rating

Was that for a purchase one or a balance transfer one?

Puzzled · 16 Jul 2019 at 15:44

touch said:
You only need the self-control for a week or so to get everything set up and you're sorted.
After the balance transfer, you can cut up the card and bin it then you wont be able to spend more on it however tempted you may be.

This.

No need to pay interest if you can avoid it. Try doing a pre credit check to see what cards are available before getting a full check on your file.

Zenduri · 16 Jul 2019 at 15:48

Bal

styuR said:
Was that for a purchase one or a balance transfer one?

Balance transfer

A2Z · 16 Jul 2019 at 16:30

For such a small amount is there no family/friends you can borrow the £2k from and pay them £150/m or something?

Or anyone with a good credit rating that can get a new 0% credit card where they can do a money transfer instead of balance transfer and you just pay them the fee? Even a standard 3% fee is only £60.

I've done quite a few balance transfers/money transfers over the years. Getting a loan would be a last resort.

Psycho Sonny · 16 Jul 2019 at 16:45

A2Z said:
For such a small amount is there no family/friends you can borrow the £2k from and pay them £150/m or something?

Or anyone with a good credit rating that can get a new 0% credit card where they can do a money transfer instead of balance transfer and you just pay them the fee? Even a standard 3% fee is only £60.

I've done quite a few balance transfers/money transfers over the years. Getting a loan would be a last resort.

Tbh I wouldn't loan any money to friends as when I have done so on holidays when they were caught short. They somehow think it's a gift and you have to chase them constantly for it. I'm not talking £30 either i'm talking hundreds of pounds. Whereas if i was in their shoes i'd be paying it back straight away.

it just makes the whole dynamic weird. As in you shouldn't have to be chasing them up, constantly reminding them then having to drive to the other side of the city to collect. Waste of time and money and can ruin relationships.

LeeUK · 16 Jul 2019 at 17:32

It'll only work if you cancel the credit card after paying it off with the loan wise you risk maxing it out again and being back in square one only this time with a loan to contend with also.

Also credit score numbers are a moot point. No bank or credit card company loans you money based on a 3 digit number.

Zenduri · 16 Jul 2019 at 17:38

A2Z said:
For such a small amount is there no family/friends you can borrow the £2k from and pay them £150/m or something?

Or anyone with a good credit rating that can get a new 0% credit card where they can do a money transfer instead of balance transfer and you just pay them the fee? Even a standard 3% fee is only £60.

I've done quite a few balance transfers/money transfers over the years. Getting a loan would be a last resort.

£50 maybe but not £2k... wouldn't dream of that. Ive shopped about and cant seem to get anyway for balance transfer cards

Zenduri · 16 Jul 2019 at 17:46

LeeUK said:
It'll only work if you cancel the credit card after paying it off with the loan wise you risk maxing it out again and being back in square one only this time with a loan to contend with also.

Also credit score numbers are a moot point. No bank or credit card company loans you money based on a 3 digit number.

Trust me its getting chopped up. I know credit scores are a bit moot but i can only work with what i can see. Ive no ccj's, 2k unsecured debt and not missed a payment in maybe 9-10 years.

I think slowly paying and no other activity gives me a pleb rating and no-one will bite lol

platinum87 · 16 Jul 2019 at 19:16

Take the loan, pay off the credit cards and stay out of the overdraft.

Do not overpay the loan, simply build up a buffer / emergency fund.

LeeUK · 16 Jul 2019 at 19:35

HybridX said:
Trust me its getting chopped up. I know credit scores are a bit moot but i can only work with what i can see. Ive no ccj's, 2k unsecured debt and not missed a payment in maybe 9-10 years.

I think slowly paying and no other activity gives me a pleb rating and no-one will bite lol

Good good. I know MSE forums debt board are always dead against taking out credit to pay off credit as it usually leads to more debt for the weak willed.

Small Loan advice

Sgarrista