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Is a personal loan the best option for me?

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Nei1
Nei1 Posts: 2 Newbie
Hi

As per the topic of this thread i am looking for some advice. I am considering borrowing £10,000 over a period of 5 years. I have been approved a Tesco personal loan at a rate of 9.7% over 5 years meaning i shall pay back £212 per month.

Just now i have around £4.5k on a credit card with the interest rate due to rise to around 28% shortly. I also have a £2.5k overdraft on my bank account which costs me £30 per month. In addition i am still paying a student loan which admittedly is due to finish within the next 8months however still costs me in excess of £100 per month.

The loan would be used to pay the above debts and also pay the remainder of my council tax for the year in order to free up some money (i am aware this is a short term solution). The remainder would be used for home improvements.

My concern is that i am already paying a mortgage as well as car payments and am reluctant to add a personal loan to this. Is this the norm? I do feel it may be a good option for me and will leave me slightly better off each month.

Any advice would be appreciated.

Thanks.

Comments

  • redpete
    redpete Posts: 4,735 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    edited 22 June 2010 at 1:28PM
    The 'best option' would be to address the reasons why you have built up £7k of debt that you are unable to clear. Without doing this the loan might clear those debts now but then in 2 or 3 years time you will find yourself in the same position but paying £212 a month on top of everything else. Needing a loan to pay council tax is a clear sign that you are living above your means, so you need to spend less and/or earn more. Another loan is not the answer.

    Using a loan to clear the high cost credit card debt is, on the face of it, not a bad idea. But only if you stop yourself spending more on the card. I would suggest cancelling the account (and not replacing it with another one).

    Are the home improvements really needed now? Unless they are required to make the place habitable I wouldn't do the work until you are clear of the debts.

    Have a look on the Debt Free Wannabe forum to get good advice.
    loose does not rhyme with choose but lose does and is the word you meant to write.
  • Nei1
    Nei1 Posts: 2 Newbie
    edited 22 June 2010 at 2:00PM
    Thanks for the quick reply.

    The debt has come from a combination of finishing University and getting myself onto the property ladder.

    As for the debt i feel that i am able to pay it slowly over time but i dont know if leaving it the way it is is the most efficient way to manage it. Totally agree about the council tax bit, the loan is not required to pay this and i could go without it however i thought it may give me a better run at the remainder of the year.

    Admittedly the home improvements are not desperately needed at this time.

    I am looking to get all my debts into one manageable payment and get myself debt clear. I thought this might be the way to go about it.

    Thanks again for your advice, i will have a read at the forum you suggested.
  • euronorris
    euronorris Posts: 12,247 Forumite
    Part of the Furniture 10,000 Posts Name Dropper PPI Party Pooper
    Nei1 wrote: »
    Hi

    As per the topic of this thread i am looking for some advice. I am considering borrowing £10,000 over a period of 5 years. I have been approved a Tesco personal loan at a rate of 9.7% over 5 years meaning i shall pay back £212 per month.

    Just now i have around £4.5k on a credit card with the interest rate due to rise to around 28% shortly. I also have a £2.5k overdraft on my bank account which costs me £30 per month. In addition i am still paying a student loan which admittedly is due to finish within the next 8months however still costs me in excess of £100 per month.

    The loan would be used to pay the above debts and also pay the remainder of my council tax for the year in order to free up some money (i am aware this is a short term solution). The remainder would be used for home improvements.

    My concern is that i am already paying a mortgage as well as car payments and am reluctant to add a personal loan to this. Is this the norm? I do feel it may be a good option for me and will leave me slightly better off each month.

    Any advice would be appreciated.

    Thanks.

    Redpete made some excellent suggestions.

    Also, the CC - have you called and asked them not to increase the interest in exchange for no longer using the card? They usually offer this, but only for a limited period before the proposed increase. Call and check, as, if you are serious about clearing the debt you should no longer need to use the card.

    I understand that it may be nice to 'comfortably' afford the repayments, but honestly, you'd probably feel much better if you tightened your belt a bit for a while and cleared the debt by making overpayments and then being debt free a lot quicker. Think about how much nicer it will feel to have all your spare income to spend sooner rather than later!

    Head over to the DFW board, as redpete suggested, for more help.

    I really don't think that a loan is the best idea for you. If you get one, I fear you will be back on here in a year asking for help again, only this time the situation will be far worse and harder to manage. Best to get a good grip of it now.
    February wins: Theatre tickets
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