Accept the Loan?

Samlee80

Hello

I'm looking to consolidate my debt and I have had a few rejections in the past 2 months (one for a Virgin credit card and another for a loan at Alliance and Leicester loan at 7.9%), however I have just been accepted for a loan at my home bank for £9000 at 15.9% over 4 years. My annual salary is £26,000 and I have about £9000 of debt spread over a few credit cards and an overdraft. I'd like to think I have a good credit rating, so I'm wondering whether I should risk looking and applying for another loan at a lower rate. My main concern is the number of searches affecting my score.

Can anybody give me advice as to whether it's worth applying for a loan at a lower rate, or is 15.9% a typical rate in the current economy? any advice would be gratefully received! Thanks :wave:

DarkConvict

Consolidation is usually a bad idea, as it reduces repayments you pay more in the loan term, take it from those on a 4th consolidation loan... they rarely work because you end up spending more money as you make lower repayments, one thing leads to another + problems on the way, and it all goes belly up and your in more debt.

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

£9000 at 15.9% over 4years 1month. (£250)
It will take you 49 months to pay off these debts if you snowball correctly. During that time, you'll pay £3,098.00 in interest.

In some rare circumstances, usually payday loan situation a consolidation can work.

For searches, avoid more than 3 in 3 months, or about 1 per month.

GeorgeUK

I agree that the statement of affairs would help. If you are spending more than your income, the loan isn't going to fix that even if the payments make things a little more managable.

Can you also tell us the credit limits on the cards?

It may be possible to get a life of balance offer from an existing lender which wouldn't require a credit search - this is best to do if you have a card with a nil balance. Some will offer 6.9% so it could be better than having that original loan.

Samlee80

Thank you both for your replies.

To ask your question GeorgeUK my limits are: £4000, £3500, £2500, and £1300 none of which are maxed out, but they all have healthy balances. I've called all of them to see if they have any balance transfer promotions and unfortunately there are none.

A 'pro' of the loan is that I can repay the balance in full at an earlier time without penalty, though I can't pay more than the monthly payment. I was thinking of taking the loan, using it to repay all of my current debts and then maybe a year from now applying for a loan (to repay the current loan) at hopefully a lower rate. I've gotten to the point where I'd like a lump sum amount to come of my account all at once, instead of having to balance numerous accounts. My plan would be to put whatever remaining money I have into a savings account in hopes that I can put that towards a lump sum that will reduce the length of my loan. This is very long-winded and perhaps risky option but I've given a lot of thought to this. I'm going to sleep on it before I commit.

Thanks again for your advice, shall keep you posted!

Oneday77

The taking out a new loan later on just lends to trouble. Loans are front loaded with interest so your actually paying for the interest first then reducing the balance. Even though they allow you to repay early you won't necessarily get a good rebate of interest.

Also consolidation loans tend to get used to clear CC debts but then the CCs get reused when something comes up, no sense of working at clearing them so you think it is safe to do a little spending.

To make the payments easier each month. Open a second account pay however much you need each month to cover the payments and get all the card DDs from the new account. You could also spread the highest APR card across as much of the others as you can, maybe even clearing one card totally.
Please list an SoA as it will give much more room for advice.