Loan advice please (for a friend)

hope_123

My best mate told me recently that she had got herself into 32k worth of debt with 6 different credit cards. She has been kidding herself for a long time that she wasn't in serious debt, but after being charged over £100 last month for being overdrawn, she evenutually admitted that she needed help.

She discovered that the interest rates on the c/c's varied between 16.9% - 37.9% (as she had been withdrawing cash on them).

I tried to help her by firstly applying for % credit cards (refused) and then applying for a low interest (8.7%) Sainsbury's loan (also refused).

When she got a phone a call out of the blue the other day from 'Debt Solutions', after talking to the nice man for 45 mins, he convinced her that an IVA was the way to go, so she made an appointment for someone to visit her tonight.

When she told me, I asked about it on here & someone said (wise words) 'under no circumstances let her see this person', so i advised her to cancel & she rang the CCCS instead.

They told her there were other options & they would send her a pack with all the info.

The next day, she got a phone call from the Halifax, saying that although she had been refused for a Sainsbury's loan, that she could get a £25k loan with them for 12.9% for 7 years, which would cost her £450 per month.

This sounds great, as it's half the amount she is paying the c/c's each month (minimum payments).

But she was offered the insurance (at £100 per month) and has taken it (as she is thinking of changing jobs & would be worried about possible redundancy or illness in the first year of a new job).

So my Q's are :

1) Is a loan the best option ? It means that £25k can be paid off the high interest c/c's leaving her with £7k to pay off (on the lowest APR c/c).

1) Is the interest rate OK ? I have told her she will end up paying £13k in interest if it goes full term, but she hopes she can pay it off quicker as she earns £52k gross at the moment & she has cancelled every direct debit she had - apart from mortgage, electric, water, council tax & house insurance & has cut down severely on her spending.

2) Is it wise to get the insurance ? She has a history of long term sickness (every year for the last 3 years she has had surgery, which meant she was off work for 2-3 months each time).


Any advice or comments are welcome.

Tixy

hope_123 wrote: »

So my Q's are :

1) Is a loan the best option ? It means that £25k can be paid off the high interest c/c's leaving her with £7k to pay off (on the lowest APR c/c). depends if she can afford to service the loan and the £7k, also depends on whether she can be strong willed enough not to take on any more debts/cards/overdrafts etc. Personally I think something like a DMP with cccs would be better

1) Is the interest rate OK ? I have told her she will end up paying £13k in interest if it goes full term, but she hopes she can pay it off quicker as she earns £52k gross at the moment & she has cancelled every direct debit she had - apart from mortgage, electric, water, council tax & house insurance & has cut down severely on her spending. Well it not that bad a rate but £13k is a lot of interest. Does it allow overpayments?

2) Is it wise to get the insurance ? She has a history of long term sickness (every year for the last 3 years she has had surgery, which meant she was off work for 2-3 months each time).It might be worth getting some insurance but nearly always cheaper to get an independant product. So that if she needs to claim she can decide what she pays rather than it just paying this loan (eg mortgage and council tax and food are more important than unsecured loan repayments) - it is an unsecured loan isn't it? This sounds high for £25k of cover. Actually it sounds high for £100k of cover.

Has she already accepted it and the insurance? I would have waited until she had discussed her finances in more detail with CCCS. Also if she has been a compulsive spender in the past it can be hard to kick the habit (especially for 7long years), sometimes its easier to have the rules imposed by someone else, such as CCCS and your creditors themselves.

Regarding the insurance - http://www.moneysavingexpert.com/insurance/cheap-loan-insurance

hope_123

1) Is a loan the best option ? It means that £25k can be paid off the high interest c/c's leaving her with £7k to pay off (on the lowest APR c/c). depends if she can afford to service the loan and the £7k, also depends on whether she can be strong willed enough not to take on any more debts/cards/overdrafts etc. Personally I think something like a DMP with cccs would be better.
She is VERY strong willed & once she applies herself to something, she WILL do it ! She has promised me that we will discuss her finances each month & she will cut up all her cards except one, which she will keep for emergencies & will reduce the credit limit to £500 so she can't overspend. She has had too many sleepless nights over this, she has cried buckets & I threatened to de-friend her if she does this again !

1) Is the interest rate OK ? I have told her she will end up paying £13k in interest if it goes full term, but she hopes she can pay it off quicker as she earns £52k gross at the moment & she has cancelled every direct debit she had - apart from mortgage, electric, water, council tax & house insurance & has cut down severely on her spending. Well it not that bad a rate but £13k is a lot of interest. Does it allow overpayments?
Yes it allows overpayments, so she is going to try to pay it off in 5/6 years or less, if she can.

2) Is it wise to get the insurance ? She has a history of long term sickness (every year for the last 3 years she has had surgery, which meant she was off work for 2-3 months each time).It might be worth getting some insurance but nearly always cheaper to get an independant product. So that if she needs to claim she can decide what she pays rather than it just paying this loan (eg mortgage and council tax and food are more important than unsecured loan repayments) - it is an unsecured loan isn't it? This sounds high for £25k of cover. Actually it sounds high for £100k of cover.
Yes I have just done a quick search & can get it for £30 per month, so will discuss that with her tomorrow, thanks for that.

Tixy wrote: »

Has she already accepted it and the insurance? I would have waited until she had discussed her finances in more detail with CCCS. Also if she has been a compulsive spender in the past it can be hard to kick the habit (especially for 7long years), sometimes its easier to have the rules imposed by someone else, such as CCCS and your creditors themselves.

Yes she has accepted the loan & insurance, in fact they are sending the cheque & paperwork by courier tomorrow !
But she can cancel the insurance can't she ?

I am now imposing the rules, as she hasn't told anyone else, I have threatened to tell her mother (scary woman) about it if she breaks them.

I hope it works !

Thanks again :beer: