Stretch it out?

angelic84

I was wondering if anyone could offer me their thoughts?

I have a loan of £12,000 left to pay. I pay £320 per month and I have around 5 years left to pay. I do manage to pay this each month but I do not have any 'spare' cash to call my own after bills etc and I know not a lot of people dont either. I have about 60 payments left I think. My question is.. I am 25, I want to be debt free by the time I am 30 which is when the payments finish. I would also like to be able to pay it off quicker and I would also like more money each month. I know I want everything and cannot have it, all I would like to know is what you guys would do;

either stick with it and keep paying it off and just keep trying to up my income as I have been doing

or

switch to a new loan which will be quicker to pay off but obviously more per month. I have looked and I can borrow the same amount somewhere else and cut off a year straight away and keep the payments the same (obviously rates would differ if I applied but not to the extent to make me worse off I dont think??)

or

get a new loan with cheaper payments but which will be drawn out longer and ultimately be paying more off?

I know I may come across as wanting everything but I just dont know what to do for the best. If I wait until I am 30 when I have paid this off is that too late to start saving (I am really thinking about all these years I cannot afford to save for a deposit on a house). Should I bite the bullet and pay as much off as I can earlier and give myself more time to save? I feel like time is running out for me. I have a boyfriend who I have been with for quite a while and we have already discussed having children. He already has two from a previous relationship and the eldest has just turned 9 so I feel like I need to have them sooner rather than later but then I wouldnt be able to keep a full time wage. I'm going round in circles. I am sorry ifI have come across as immature or daydreaming but I feel life is passing me by and I need to do something.

Fonz_2

How long have you been paying it off already?
What is the APR? The payments seem high.
Do you have payment protection on the loan?

angelic84

Fonz wrote: »

How long have you been paying it off already?
What is the APR? The payments seem high.
Do you have payment protection on the loan?

It started out as a loan I got a few years ago for me and my ex to do up our flat, get a car and furniture and a few things which was £5,000. We have since split up and I was left with it and it has snowballed. I do not have PPI. Not sure what the APR is either.

angelic84

I have just dug out my paperwork

Borrowed around £13,000
Monthly repayment £316.27
Total Amount Payable £ 18,976.20
60 months

Total Interest £6,326.20
17.25%

Does this add up?

Fonz_2

If your credit history is ok you may be able to apply for another loan which would reduce your payments but still pay it off within 5 years.

However, this probably also depends on your income as you'll essentially be asking a bank to lend you ANOTHER £12,000 making your total credit commitments £24,000.

angelic84

so i guess i dont just have £12,000 left to pay cos i havent included the interest right? any help please...........

Fonz_2

No, technically speaking you still have £18,960 left to repay. The interest rate is high considering banks are offering 8-9% typical but of course it depends on your credit history, income, etc.

Out of interest is the loan with your own bank? If not it may be worth trying them for an alternative.

angelic84

my loan is with natwest who i have been with since 2000. would it help if i told you my earnings? i dont understand why the payments are so high when i can see other loans are cheaper. i do not have any other credit at all and never have. not even a store card

Fonz_2

Unfortunately it may be the fact that you have no other credit which works a little against you.

It may be worth shopping around with other banks but obviously be aware that for every application you make this is recorded on your credit file so you shouldn't go madly applying for them

To give you some perspective on how a bank will see things: You're essentially asking for another £12,000 credit on top of your existing £12,000 - even though you're going to pay one with the other.

So with this in mind, if you earned £48,000 per year you're committed to half of your gross income just for the loans - a bad thing.

If you earn £30,000 per year you're asking for 80% of your earnings, which is worse.

Etc. etc.

angelic84

thanks for your help, just dont understand these things too well. My bank declined me for a new loan which would make the payments cheaper and pay back the same as their rate had dropped but apparently i cannot afford to make lower payments that i already am as their lending criteria has changed???!!