Consolidation Loan

EllieA_3

Hi i'm looking to consolidate my loans, because right now what im paying out each month is a huge stretch.

We are "surviving" and managing to make all the payments but we are left in a stressful situation each month as my husband is self employed and some months earn's nothing, each month we ride the rollercoaster of "will he, won't he" earn enough to pay the bills and although so far he's managed to scrap together the cash it's putting a huge strain on the relationship.

I've been in touch with a few company's and i've been offered a loan which will effectively cut my outgoings in half. Which is obviously very appealing as it would mean my wages would cover the bills without him earning a penny and his earnings could then be used to put cash into our savings provide us with a buffer for lean months as well as hopefully save to pay off the loan early.

Now the loan would be a secured loan of 25k over 11 years but im concerned by the APR which is 18.6% now while i hope not to be paying it for the full term it seems very very high, and doing the maths it seems we'd end up paying double what we borrowed.

Does this sound high to people?

We have a goodish credit rating, all our bills are paid on time and while we've had 2-3 returned payments in the last few months (hence the reason we are looking to consolidate) before that everything was all ways paid exactly when it was supposed to be.

Anyone got any suggestions?

AMILLIONDOLLARS

First question will these loans be on a variable rate, ie the interests payment could you go up, if/when interest rates do. Or are they fixed term, where the repayment per month remains the same throughout the term of the loan.

AMD

iolanthe07

The general advice here is never to secure unsecured debt on your house - otherwise you may lose everything including the roof over your head. Consolidation is also generally not considered a good idea because so many people consolidate and then just go on to rack up more debt. There are people here who have consolidated over and over again until they are really screwed. You have to be very disciplined because consolidation gives you the illusion that you have paid debt, when in reality you have just extended it. 18.6% APR is huge on secured loan - that is a credit card rate - I don't know how the lender has the brass neck to ask for that sort of interest when they have your house as security. Go over to the debtfreewannabe board and see if the people there can come up with some ideas without you having to take the risk of a secured loan.

fozmcfc

Whilst you don't mention it, if any of the debt is on credit cards, you could look at getting a 0% APR card for 6-14 months to transfer it too.

CLAPTON

well, if you are going to get a secured loan then why not get a mortgage top up rather than pay a rediculous 18.6% APR... which will mean repaying over 54,000 back

fozmcfc

CLAPTON wrote: »

well, if you are going to get a secured loan then why not get a mortgage top up rather than pay a rediculous 18.6% APR... which will mean repaying over 54,000 back

When you look at it like that :eek:

EllieA_3

Ok having had a re-think and a word with our morgage company it seem's likely they will give us a re-morgage.

At the moment we have a £30,000 morgage, re-jigging that to £55,000 will pay off all of our debts clearing £780 worth of re-payments we currently make while only adding £150 per month to the actual payments on the morgage, a total saving of £630 per month which is obviously alot better and lets us breath much easier.

I sware to god i am never letting us get into this state again! argh!

Raggs_2

Once you have a bit of a savings cushion, try using some of that extra cash to start overpaying your mortgage.

EllieA_3

How does overpaying ones morgage work?

Raggs_2

A question best asked in the Mortgage free wannabe board . To my limited knowledge, it depends on your mortgage lender/type. But generally, you can pay upto so much (either a percentage or set amount) off each year. And in doing so, either reduce the payment required each month, or as most people prefer, shorten the mortgage term.

Some mortgage lenders even put aside the overpayments, so that if you suddenly need cash, you can withdraw it straight away (almost as though you remortgage, without having to worry about too much red tape).

Peelerfart

EllieA wrote: »

How does overpaying ones morgage work?

Pretty much as Raggs says really. I spend most of time on the mortgage board and MFW board and there are some good guys there.

Once you've got your cushion of cash, overpaying on the mortgage is good if you can afford to. The effect of OP's will not become clear early but over a long period of time WILL reap benefits.

My advice for you is to clear your debts with the mortgage,build up an emergency fund,3 to 6 months money and then OP the mortgage.

I'll leave my sig on the bottom so you can see the effect of OP's.
Even though my mortgage is falling, I'm paying more now,monthly,
than three years ago.