Loan to pay off Credit Card Debt Advice

rags2riches_2

[glow=red,2,300]IS A LOAN THE ANSWER TO ALL MY PROBLEMS [/glow] ???

I have approximately in £6000 of debt with two credit card companies, paying interest of 12.9% and 17.8% respectively.

I have further debt on another card of £2500, however this is on a long term 0% interest deal so it is not an immediate concern.

I am currently considering applying for a loan to pay off the £6000 of debt as I am finding it difficult getting accepted for other 0% credit cards.  Therefore I am stuck paying high interest on the two cards I have.

I am currently paying off around a combined £150 per month on these cards so this is the amount I can afford for a loan repayment.  £60 of that is swallowed up by interest payments!!!!  >:(

Is a loan the best option for me?  Any advice please.  Any further details needed, please ask.

Thanks

[glow=red,2,300]STOP PRESS[/glow]

***I've been looking at CAHOOT'S Flexible Loan at 6.9% APR.  A flexible loan sounds ideal as sometimes I may not be able to afford £150 and sometimes can pay off more.***

***If I could get a flexible loan for £8500 (total debt) I could use the £6000 now, and then the £2500 when the 0% deal expires on that card? sound ok?***

Martinslovechild

The Cahoot flexi loan is very good BUT 6.9% is their 'typical' APR - i.e. not everybody gets that rate, some people get higher.

Also, Cahoot are picky about who they offer products to.  If you apply and they reject, then I suggest opening a savings account with them and retry for the flexi loan in 3 months time.

If you need something straight away, then consider other loans e.g. Liverpool Victoria (although this loan uses the Rule of 78 - nasty if you want to pay it off earlier than you originally intended), or Northern Rock.

Rags - do you own a property? If so, you could consider extending your mortgage to cover the loan amount? Remember though that this would add more in interest in the longer term but ease your current worries.

rags2riches_2

I applied for the Liverpool Victoria Loan, but was rejected!!

Really worried if anywhere will accept me!

margaretclare

Hi

Wouldn't it be a much better idea to do some 'rate tarting' i.e. switch those credit card debts from interest-paying cards to ones with 0% interest? That way you could concentrate on paying them off while not stacking up interest on them.

Taking on a loan, you might end up paying a lot more in interest because you'd be paying it off over a longer period of time. And of course, there's the danger of racking up more debts in the meantime...

Best wishes

Margaret

westernpromise

[glow=red,2,300]IS A LOAN THE ANSWER TO ALL MY PROBLEMS [/glow] ???

Could be, but in your shoes I would do some housekeeping first.

If you have any extra unused credit on those cards, the first thing I'd do is BT as much as possible from the 17% one to the 12.9%. Then contact the issuer of the one that's charging you 17% and ask for your credit limit to be reduced to whatever your balance now is. Too much credit looks bad, so you want it to look like you have as little as possible.

Another piece of lateral thinking: if you have an overdraft facility with your bank, and it's no more expensive than one or other of your cards, use the overdraft to pay off some of that card. As well as saving you a few quid, it will improve your apparent credit status. Banks do not disclose your current account balance to credit reference agencies, so £2,000 of overdraft at 12% costs the same as a £2,000 balance on a credit card, but is invisible to a credit search.

If you're getting declined for loans, it is probably something in your credit history that's causing a problem. When did you last look at your credit file at Experian, Equifax, etc? Have you moved house recently? Maybe you're not on the electoral roll, or you appear to have more than one address (eg you still get credit statements sent to parents even though you've moved out)? Do you have loads of inactive cards with substantial available credit on them? Have you made lots of applications for credit very recently? All those things tend to worry lenders.

Get hold of your file and see what it looks like. If there is something obviously amiss, get it sorted before you try for more credit. I'm afraid this means biting the bullet for at least three months and eating those nasty interest rates.

Next, as far as loan finance goes, who do you bank with? Try them first for a loan, even if their rate doesn't look so hot. It will be better than what you're paying. The cheap rates you see advertised are not necessarily available to everyone. There is no point fretting about that, you have to play the hand you have.

Try to go into a branch, tell them where you are with everything, and see if you can get a feel for whether they'll approve you. If they shrug and say you'll have to take your chances with the centralised application procedure located in Bangalore, don't bother - they are likely to treat you like any Joe off the street, and you don't need another credit search.

If you hate your bank, try switching to someone more sensible. I'm with Nationwide, whom I regard as the John Lewis of banks. They are rarely the best in any area, but they are competitive overall (eg overdraft rate is 6.75% last time I looked). Best of all, the branch staff tell you their names and phone numbers, they return phone calls, and branch managers have some discretion to approve overdraft extensions.

There's no magic bullet here, I don't think, but hopefully the above gives you an idea of a few things you can try to improve things. And of course I assume you're doing all the right stuff in terms of minimising outgoings. If you do get a loan sorted, your best bet is to make the monthly payment rate on the loan as high as you can bear. It's not smart to halve the interest rate then spread the loan out over three times as long!

Nickynoo1

a brief 2 penneth,

As a student do natwest not offer a interest free overdraft facility? Or student loan?

Nickynoo1

westernpromise

Will I be more likely be accepted for a loan by my own bank who I have a good history with?

There's no way to know, but the raises in your overdraft limit are encouraging, shall we say.

I don't know how NW go about processing loan applications. It may be that they just score everybody identically via some centralised standard process. It may also be that they don't, though, and that case, being a long-time customer in good standing counts for something. For one thing they can inspect 6 years of account management history, and see if you are OK with money. That is not possible with someone they don't know.

This is why I'd suggest you go to see someone in your home branch and ask them two leading questions, namely:

1/ "If I apply to you for a loan today, will my status as a customer in good standing for 6 years improve my chances of acceptance?"

2/ "If not - remind me again why I'd bother applying to you, as opposed to Barclays or whoever - I mean, what is the point?"

Bank staff have performance objectives and one of them is to flog loans. Tell them you'll apply for a loan today (i.e. the bod you're talking to gets to sell you a loan today!! This minute!!) - if you get a sensible-sounding answer to those questions.

Paying a total of £883.84 interest over 4 years, paying £153.83 a month, is much lower than the interest I'd be paying by paying the same amount off my credit cards per month!

And will clear the debt a lot quicker. Don't get railroaded into buying loan insurance. You can obtain an equivalent benefit for a fraction of the price - like 10% of the price - from specialist insurers like Goodfellows.

I am very intrigued about your comments about having 'too much credit'. I didn't even realise this would count against me! I have a Debenhams Gold Card with ZERO balance (use it for store benefits only) but a credit limit of a whopping £5,500. Would it be wise to get this reduced asap?

Definitely. I'd get rid of it altogether. It does nothing for you your other cards can't do. Worse, if you use it, there's a risk you'll forget to pay it off, and you then incur interest at some disgraceful rate.

The parameters of credit scoring vary according to who's doing it. I understand, though, that having an "excessive" ratio of available credit to income loses you brownie points with some lenders.

There's no way to know what this ratio is. It does make sense in a way - "If this bloke's got £20,000 of credit available, why does he want more? Has he got some sort of money problem we can't see in his credit report? Better safe than sorry - turn him down."

have you had any experience with this? For example surveys, questionnaires etc etc??

Yes, but it's hit and miss. I fill in youGov, SurveySpot, and Lightspeed surveys. YouGov pay actual money, but you can only withdraw a minimum of £50, and after 15 months I've only got to about £16!! The others pay back on a prize draw basis. I've had about a tenner. They're OK to while away a lunchtime, but there's no money in it.

Once again, thankyou SO SO much for all your help.

You're welcome - let us know how you make out.