jugglingg debt

vangelic

hi, new to this site, have been lurking for a while

Got more of a question than a problem.

In total i have 7200 in debt, 4700 on a hsbc credit card , 1200 loan from blackhorse finance and 1275 on a hsbc loan.
i earn 1100 every month and my outgoings are

blackhorse loan 102
Credit card 200
hsbc loan 85
rent & food 240
Bike insurance 42

a total of 700 per month. The remaining cash is used over the month on fuel mainly, and as much as possible goes into savings.

Hsbc has just sent me a letter aprroving a loan of 5000 @ 170pm over 3 years. I haven't asked for it but they've approved me for one ???

Right, i was thinking of getting this loan and using it to pay off the blackhorse loan, the existing hsbc loan and a fair ammount of the credit card

Just check my maths

5000 new loan @ 170pm
-
1200 blackhorse
-
1275 hsbc loan
=
2525 left


4700 hsbc credit card
-
2525 left
=
2175 left on credit card

The min payment on the credit card would then be 70

so my monthly outgoings would be

Credit card 70
new hsbc loan 170
rent & food 240
Bike insurance 42

a total of 522 which is a saving of 178 on the 700 i am paying now that extra can go on the cc to pay it off quicker so i only have the 170 per month to pay, that make sense to anyone?

Robert_Sterling_3

The interest rate on the loan looks high to me so can you tell us what the APR is.

Can you tell us the interest rates on your credit cards too.

Without such information it is difficult to know what advice to give.

vangelic

the apr of the loan is 13.9%, the credit card stands at 1.456% interest per month. It's got the higest interest so i want it gone first.

I am not struggeling with the debt at all, the two loans will be paid off within two years but i'd really like to get the credit card off sooner than that, this seemed like a way of doing that, pay off the two loans with the new one, put the remaing lump sum into the credit card and use the ammount saved each month to pay the card of quicker. Once thats gone i can save up to pay the loan off early.

If i do that i can put at least 250 per month into the credit card, it'll be paid off within 9 months after that the loan isn't really a major problem.

So witin 9 months my outgoings will have gone down from 700 to 452

funkymonkey

perfect senario would be for you to get a loan with another provider at a lover APR than 13.9%

If this is not possible then could you not use your savings to pay off some of your credit card - the interest you are paying on your debt far outways the interest on your savings.

if you cant get your loan cheaper then think about bugetting before you take out another loan. - for now it may mean that you reduce your min payments and have more outgoings but what will happen if you need some urgent money say 6 months down the line? chances are you are like the rest of us and will put it on the card. meaning you have more debts!

first try :

use money in savings to pay off some of card

budget hard! and pay off more of credit card.

then increse your payments to your loans to pay them off early too!

debt free = stress free and a happy warm feeling inside!

C_Botterill

Couple of points....If you do wish to proceed with the consolidation loan, consider alternative lenders such as Nationwide, Alliance & Leicester, Direct Line for a loan interest rate lower than HSBC.

By taking out a loan over a longer term you could end up paying more back in the long run.

dag_2

By my calculation, a loan of £5000 at £170 per month for three years is equivalent to an APR of 14.52%.

ffs

Blackhorse will penalise you for paying off their loan early. They will tell you that there is a formula that determines how much penalty you have to pay, which is a lie. The formula determines what the maximum early settlement penalty is, in truth there is no minimum.

Will you cancel your credit card (or cut it up), or will you keep it for emergencies. If you keep it I promise that an unexpected emergency will arrise and you will use it, and now your debts have grown because you have been clever minimising your repayments.

Welcome to the debt escalator.

nh

Is the loan's APR much different to the credit card? If so, don't do it, find a cheaper loan.

Or, if HSBC allow you to repay to them what you would have repaid to the credit card (more than £170 a month) you would save money even if the APR is only a bit lower on the loan.

You will probably find Black Horse do not make if worth your while paying off their loan (and is that at a higher APR?).

It is OK to consolidate debts onto a cheaper APR but only if you continue to pay back what you were paying back each month anyway, otherwise you end up paying more in the long run.