Managed loan, taken during harder times

Fierce1979

Hello all

I have an issue that whilst I'm not sure can be resolved, would be interested to hear your opinions on if poss?

5 years ago when I was young and foolish, I gratefully accepted a credit card and a large overdraft from my bank. At the time I was earning far more than a lad of my tender age should do without saving some, and I duly spent it accordingly. Then things changed, and usual story I got into debt that I couldn't manage. So, my bank, HSBC came to my rescue like the knight in shining armour that they are

They offered to put my credit card (£4k approx) and overdraft (£2.5k approx) into one consolodated and manageable loan. How helpful!

I have been paying £110 per month every month for what is now, 5 years

You have no idea how sick this makes me feel by the way

So, £110 x 60 = £6600. Bar interest, this should be paid off. Yet I still owe £4400

I dont know why I've left it so late to ask you guys, but I have spoken to HSBC and they are utterly unwilling to do anything about it whatsover, despite the fact that now, that loan aside, I am debt free and earning good money again, which this time I am managing accordingly!

I would have gotten a loan to cover this, but because it is a managed loan it keeps my credit rating down, so that a loan isn't a viable option.

So, aside from me being totally stupid as a youngster, as well as being almost as stupid in paying so much interest for all these years, is there anything I can do about this?

I'm not trying to get out of it, I'm just interested to know if anyone has experienced anything similar

It makes me sick to think how much i've paid already, how much I'm yet to pay, and the fact that the bank have been so unwilling to help me in any way, though I fully accept that it was my own doing in the first place

Further, I just asked for a settlement figure, and there is no such thing, because they add the interest every month, therefore the outstanding balance now, is the sum I'd have to pay

I feel so sick typing this!

EDIT: Wow, apologies for typing out War & Peace, guess once I started I couldn't stop! Think this is a form of therapy

CLAPTON

whats the APR of the loan?

what exact do your credit files say?

as you're on good money why are you only paying 110 per month?
or alternatively how much have to saved up?

clarence83_2

I had one of these, just overpaid by as much as i could every month. I signed up for the loan, so there was no getting out of it! Means I am really careful now that's all

Fierce1979

CLAPTON wrote: »

whats the APR of the loan?

what exact do your credit files say?

as you're on good money why are you only paying 110 per month?
or alternatively how much have to saved up?

I dont know what my credit files say

I just got a new Virgin credit card and paid for credit reports so I will check that out when it comes through and post in here

Regarding the APR, I'm not sure but I dont think it has one, as such. It looks like it isn't a loan, but more of an overdraft type arrangement. That is, interest is accrued on what is outstanding, as opposed to a fixed rate. So the amount I pay monthly goes toward the total debt, which is simultaneously accruing interest on a monthly basis

You may have guessed that I'm not particularly well versed in money matters!

Now that I'm in a better position, I will pay more than the £110 per month, and of course should have done this a long time ago

CLAPTON

It does have an APR... ask them what it is. All loans have interest accruing each month based on what the balance is.. that's how loans work (and mortgages )

From the limited info you've given, it looks about 17% which isn't totally unreasonble
The reason that the loan isn't reducing very fast is that your monthly payments are too small.

Once you know the APR of your loan and seen what your credit reports say then maybe it would make sense to apply for a new loan and pay off the HSBC one.

Make sure you set up a Direct Debit for the full amount for you new Virgin CC so you new forget to pay and never pay any interest.

betti911

If you are thinking about overpaying then look at this link:

http://www.whatsthecost.com/snowball.aspx

It shows you how much of a difference a little extra to your debt each month can make.

Margin_Walker

CLAPTON wrote: »

It does have an APR... ask them what it is. All loans have interest accruing each month based on what the balance is.. that's how loans work (and mortgages )

From the limited info you've given, it looks about 17% which isn't totally unreasonble
The reason that the loan isn't reducing very fast is that your monthly payments are too small.

Once you know the APR of your loan and seen what your credit reports say then maybe it would make sense to apply for a new loan and pay off the HSBC one.

Make sure you set up a Direct Debit for the full amount for you new Virgin CC so you new forget to pay and never pay any interest.

The interest rate on a Managed Loan is a variable rate that is usually 7% over the BOE rate as long as business debt was not also consolidated. This obviously means that the interest the OP is paying is a lot less now on a monthly basis than it would have been a year or two ago due to both a reduction in the balance and the rate itself.

As with all 'mortgage' style loans it really is advisable to overpay if at all possible to reduce the amount of interest paid and the overall term. In terms of how it shows on a credit report i think it shows as some sort of repayment agreement but I might be off the mark with that.

Fierce1979

Cheers all

I just got a Virgin credit card with 0% on balance transfers and cash advances until November 2010

Presumably the general consensus (after reading other sections/threads) would be for me to use this to pay off the loan, or as much as the limit will allow, and utilise the zero interest?

I may not be able to clear it ALL though, I already transferred a different card over so the balance will be too high for me to clear it all, unless I have a particularly good bonus this year!

Is it violently expensive interest wise, once the 0% expires?

CLAPTON

You really need to find out the current rate you are being charged on your loan before transferring although it looks like its best to transfer as much as possible

You now mention you have a CC debt... do you have any other debts.... how much?... after your experiences with the managed loan it may have been sensible to avoid other debts

How much can you realistically pay off in a year?

Do you have a proper budget and do you know where all your income goes.. this is a good format
http://www.makesenseofcards.com/soacalc.html

You should seriously think about a plan to pay off all the debt and make some realistic targets ..maybe debt free in a year or so? would that be possible?

Fierce1979

I'd like it to be possible!

Total debts are as follows:

CC - £2950 approx
Managed Loan - £4400

Have no debts other than those, no overdraft or store cards etc

I got this latest credit card to transfer debt off an existing Egg card (account now closed) and because my girlfriend and I had run up a few grand each on hers, and I'd prefer to have it in my name

So, currently paying £110 to the managed loan, and then whatever I want on the credit card, which I decided to pay off at £200 per month

I'm thinking if I pay off £400 per month for the next 14 (interest free period expires Nov '10) then thats £5600, leaving me roughly £1750 left to pay. I earn commission in my job as well as a yearly bonus, so I think that a combination of the two should enable me to clear the excess before the interest free period runs out

Of course this isnt a guarantee, but I think that the quicker I can get out of the managed loan the better?

Thanks for your advice btw, it really is appreciated