Best Strategy: Loan or ODs

CheekyMonkey22

Have posted elsewhere as well.

I graduated last summer with semi-monstrous debts (in addition to my student loan), which are all interest-free at the moment.

I umming and arring whether to take out a loan to cover my repayments as it may be cheaper in the long run.

My current situation is:
Overdrafts:
Natwest Graduate - £2,000 (0% interest until June 08, But £1,000 needs to be paid by June 06)
Smile Student - £1,800 (0% interest until June 06, after 9.9% until repaid)
Halifax Student - £800 (0% interest until June 06, unknown after)
Total payable before Jun 06 - £3,600

Credit Cards:
HSBC CC - £2,000 (0% interest until Sept 06)

Also have the added complication that I am starting my new job shortly (woo!), and won’t get paid for ~ 2 months (boo!). I’m looking for advice as to the best course of action and for it to be as cheap as possible.

Although everythings interest free at the moment, I've only got a couple of months to sort it out.

I'm considering a £5,000 graduate loan from RBS at 7.9%, with a payment holiday of 9 months. Will work out about £200 per year interest (~ £17 per month). But by my reckoning, this could be less than paying interest on my O/Ds and any charges etc.

£5000 loan would also provide me with the funds to move (need rent x 2 etc..) Also would give me 9 months (payment hol) to save up to pay off most of the HSBC CC.

Any suggestions are gratefully received. Interested to see what everyone thinks of my grand plan.

Me_Myself_2

Firstly, have you got the interest right on the £5k loan. I make it around £400 in year 1.

CheekyMonkey22

Good point, I worked it out to be £395.

But the RBS Calc is showing the total amount payable £5,613.48 (~£200 pa)

mountainofdebt

CheekyMonkey22 wrote:

Have posted elsewhere as well.

I graduated last summer with semi-monstrous debts (in addition to my student loan), which are all interest-free at the moment.

I umming and arring whether to take out a loan to cover my repayments as it may be cheaper in the long run.

My current situation is:
Overdrafts:
Natwest Graduate - £2,000 (0% interest until June 08, But £1,000 needs to be paid by June 06)
Smile Student - £1,800 (0% interest until June 06, after 9.9% until repaid)
Halifax Student - £800 (0% interest until June 06, unknown after)
Total payable before Jun 06 - £3,600

Credit Cards:
HSBC CC - £2,000 (0% interest until Sept 06)

Also have the added complication that I am starting my new job shortly (woo!), and won’t get paid for ~ 2 months (boo!). I’m looking for advice as to the best course of action and for it to be as cheap as possible.

Although everythings interest free at the moment, I've only got a couple of months to sort it out.

I'm considering a £5,000 graduate loan from RBS at 7.9%, with a payment holiday of 9 months. Will work out about £200 per year interest (~ £17 per month). But by my reckoning, this could be less than paying interest on my O/Ds and any charges etc.

£5000 loan would also provide me with the funds to move (need rent x 2 etc..) Also would give me 9 months (payment hol) to save up to pay off most of the HSBC CC.

Any suggestions are gratefully received. Interested to see what everyone thinks of my grand plan.

Well firstly - why won't you get paid for 2 months? Can you not ask your new employer to 'sub' you in the meantime ........I am assuming of course that you will then be paid monthly. I would also check out what the APR on the smile debt is after June 06.

I would be against taking out a loan to consolidate debts - for reasons that have been posted numerous times ....the false sense of wealth etc and especially if a large proportion of that debt (ie the natwest debt) is at 0% until 2008.

With a little bit of tarting (and I assume a good wage?) you could pay off this debt at 0% very quickly.

btw what will be your income (if you don't mind me asking!) and outgoings when you do start the new job?

CheekyMonkey22

Calculated outgoings to be around £800-850 (quite generous allowance).
Net salary with be about £1,100.

My current situation is that I'm living rent free(!) with my parents and am temping until I start my new job.

Issue is that the job is with the MOD and I have to wait for security clearance before I start. So I don't actually have a start date as of yet (likely 8 weeks). I'm also going to have to move to take up this new job.

Pay is 1 month accrued, so won't get paid until the end of the 2nd month.
Also have to find deposit for rented place and 2 months worth of rent (and living costs!)

Hmmm.

Willsnarf1983

CheekyMonkey22 wrote:

Also have the added complication that I am starting my new job shortly (woo!), and won’t get paid for ~ 2 months (boo!). I’m looking for advice as to the best course of action and for it to be as cheap as possible.

i would check that bud coz when i started i thuoght exactly the same thing that i wouldn't be paid for two months when i was told i was working a day in lieu but in actual fact it meant i worked one month and was paid at the end of it

Will

Chortle_2

When a salary is paid a month in arrears, it generally means that if you started on 1st March, you'd get paid for that month on the 31st (or whenever the pay day is) - making you work for 2 months without pay would be highly unusual I think. It is normally only bonuses and overtime done in 1 month (i.e. March) that would be calculated at the end of the month, and then added to the following months pay (i.e. April)

Might be worth asking.

mountainofdebt

If you're living wth your parents do you have any savings to hand?

Check tomorrow what the Smile debt APR after June will be.

Also can you list your anticipated outgoings/income when you do start your new job - might also be worth listing your income/outgoings that you have now so that we can maximise those savings.

Once we have that we will be in a better to advise.

CheekyMonkey22

Thanks for all you comments so far. Is something to consider.

I have absolutely no savings not a penny to my name. If I did, I would have used that the fund Uni. Funding for Uni is my pet rant, £3000 to pay for rent (£3000+), full tuition and living costs. Hmmm. Yes, I know I choose to go, before someone says it! :rolleyes:

Breakdown, is pretty much a guess. I rented while I was at Uni, but was in a completely different area and in a household of 7 so isn't really comparable.

Month Annual
House Rent (inc bills) 400
House Insurance Guess 8.5 100

Car Car insurance 48
Car Tax 100

Travel Expenses 100

Personal Clothing 50
Contact Lenses 11
Mobile Contract 30
Entertainment etc. 100
Toiletries 10

Car Servicing Allowance 25 300
Total ~800

Is quite generous because I just don't know how much it will cost! Will be a new area, in a new job, having to solely run a car (which is paid for) which I haven't had to do before, with unknown outgoings (as I have been living as a recluse)!