Take a 3% loan to pay off a 200% loan /
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Hi, I have a £7,500 loan with Amigo. Though the APR is 50%, the interest is added daily so it works out whatever you borrow, you pay back double.
This means I owe them £15,000. I have a pay as you go credit card which has put my credit score up and I may be eligible for a 3% Zopa loan.
My question is should I take out a 3% loan for as much as I can afford (maybe £5000 over 60 months) and use that to pay off £5000 of the Amigo loan in one go to reduce the interest?
Thank for any help.
Adam
This means I owe them £15,000. I have a pay as you go credit card which has put my credit score up and I may be eligible for a 3% Zopa loan.
My question is should I take out a 3% loan for as much as I can afford (maybe £5000 over 60 months) and use that to pay off £5000 of the Amigo loan in one go to reduce the interest?
Thank for any help.
Adam
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Comments
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On that occasion I would say yes but you had better check there are no penalties first. Why did you take it out?I’m a Forum Ambassador and I support the Forum Team on the Debt free Wannabe, Budgeting and Banking and Savings and Investment boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.0
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Mother-in-law setup an ISA for wife's funeral (no shes not dead, but mother-in-law thought it was a good idea.). I lost my job, wife has bad back where she fell out of the loft hatch and can't work, but cos it's not a permanent disability (when it goes, she can't move but this happens at infrequent times) she doesn't get benefits and we had to use the ISA to pay the rent til I managed to get another job. Now the mother-in-law might want to move house and might need the ISA back as a deposit so we took out a loan in case.
Amigo don't seem to charge for extra payments, but I'm not sure it will lower the monthly amount. Just might take less months to pay off.0 -
If you can make your debt cheaper then yes do it.0
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I very much doubt you will be accepted at Zopa with an Amigo loan on your credit file. But as the saying goes, if you dont ask you dont get.The instructions on the box said 'Requires Windows 7 or better'. So I installed LINUX
:D0 -
If you have an amigo loan it is highly unlikely that you will get a 3% loan.
Why did you take an amigo loan? Was it because you were out of work or poor credit history?0 -
The only way to find out is to apply.
You'd likely not get the headline rate, but anything lower than 49.9% APR is better than nothing.
Remember the Interest rate is annual, compound interest, so if you pay over longer periods, you pay off so little capital that the interest added on over the term almost matches the amount paid off. High interest loans should be paid off in the shortest space of time possible for this reason.
In debt and looking for help? Look here for the MSE Debt Help Guide.
Also, If you need any free and impartial debt advice, the National Debtline, Stepchange, and the CAB can help.0 -
Now the mother-in-law might want to move house and might need the ISA back as a deposit so we took out a loan in case.
Madness. It is madness in any case to borrow at Amigo interest rates in the first place. You would have been better off (and there would have been no additional risk to your guarantor) if you guarantor had taken a loan at a better rate, given you the money and you met their repayments. But to borrow under such onerous interest rates on a 'just in case' basis makes no sense at all. You are paying a lot of interest for nothing.
I assume that MIL has no needed the money back yet? And if that is the case you still have the £7.5K? If that is the case repay the loan immediately and address the issue if and when you need to borrow.
In the meantime you can save the equivalent of whatever repayments you were making to Amigo into a find to put towards repaying the £7.5K as and when you have to.0 -
You should put as much as possible into the lowest possible interest rate you can get.
I'm not sure if you still have the £7.5K? If so, Mem62 is right, repay it immediately. You should probably also throw any spare savings you might have at it as well. Sell anything that you don't need to repay it.
Once reduced, it will be easier to find cheaper options.
Even if there are small fees involve with early repayment, given the amount you will save on the whole debt by reducing the extortionate interest, they are probably worth paying (can't believe I just said that) but you will need to do the sums.
You need to start with your credit file - plenty of advice on here how to improve that and to have free access to it.
At that interest rate, pretty much anything is going to be cheaper - even a bank overdraft. Have you spoken to your bank?
There will be far easier ways to support your MIL if she needs the money later on. I think you probably realise this was not one of the best decisions ever made. You should focus on repaying this as quickly as possible at the lowest possible interest rate, improving your credit score, and finding cheaper ways to help your MIL later if and when it's needed. Good luck!Debt 1/1/17 - Credit Cards £17,280.23; overdrafts £3,777.24
Debt 5/1/18 - Credit Cards £3,188; overdrafts £00
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