7.7% loan/nothing to pay for 6m - good?

kopicbloodaxe

I'm not in debt crisis but am after some opinions and suggestions, please.

I can currently (just) meet all my commitments but will soon have a boost in my income of at least £500 per month due to going onto standby at work. My wife works part-time and earns a little money but wants to give up the job and concentrate on her education.

Consider this:

£4300 at 0% on Sainsbury's Bank CC (for 12 months)
£13000 at 8.3% on Cahoot flexible loan (for some time)
£4700 at 2.9% on Barclaycard (for life of balance)

Total debt around £22k

I am considering consolidating the cahoot and barclaycard debts into another loan and continuing the 0% credit card shuffle as long as necessary.

loans.co.uk offer loans at 7.7% (typical) with an optional 6 months payment holiday before you start paying.

Do my learned colleagues think that taking this payment holiday is a good idea? Especially if I use the money I save for this period to potentially pay off the 0% credit card?

I know this may sound a bit daft but my goal is to reduce the overall debt total ASAP (isn't that what most people want? )

In 6 months time my outstanding debt would then be £18k and I can use the extra money from having paid off the credit card to reduce the period of the loan. Or maybe take another 0% balance transfer card and chip away at the loan that way.

I really want to clear all my debts within two years.

Many thanks!

--Simon.

DiggingOut

Simon, if you want to reduce your debt quickly, why would you move a debt from 2.9% to 7.7% and then not make any payments on it for 6 months?

Why rush to pay off your 0% credit card when you can just reduce your cahoot loan?

Are you good at Excel? If so, I suggest you work up a spreadsheet showing all your debts, and how much you are going to owe at the end of 12 months if you continue as you are, applying all excess funds to the cahoot loan to reduce it as quickly as possible.

Then, another spreadsheet, showing your proposed loan with a payment holiday, and all payments going to reduce your 0% card. You will find this is MUCH worse -- you will have more debt this way.

If the proposed loan is flexible (like the cahoot loan), it makes sense to move the loan over for a lower rate -- but certainly not if it uses rule of 78 or has any other penalties.

In general, you want to make the highest payments possible on your highest interest debt, and the lowest payments possible on your lower interest debts. In your case, that means minimum payments on your two cards and maximum on cahoot, or on the new loan if you do that.

Under no circumstances should you stop paying on your highest interest debt (the new loan) while making extra payments on 0% debt. This is lucrative for lenders, not for you.

Freddie_Snowbits

£22,000 no crisis

What if you cannot budget?

Oh, I am living up to my name.

Problem with that, at least andycash has some courage, see http://forum.moneysavingexpert.com/cgi-bin/yabb/YaBB.cgi?board=Debt;action=display;num=1092613133

Oh you could put your head in the sand if that gives comfort.

DiggingOut

Always helpful, Freddie. ::)

When someone asks for advice on these boards, they should get honest advice, not criticism. You claim to be brutal sometimes. The next time I see you being brutal I'll make a list and report you for offensive posting. It's so unnecessary.

You really ought to get a life -- going out of your way to abuse people who are asking for help is NOT a life.

System

DiggingOut........

I shake your hand wholeheartedly.

Well said in regard to the 'bitter' person who goes by the name of Freddie_Snowbits.

If you need the Samaritans, their number can be found in the phone book.

To be as offensive as you are, 'Freddie_Snowbits', it would certainly appear that you have a problem that needs dealing with urgently.

Until you know what being civilised is, don't bother posting.

Heddwen_2

Here here! I agree with DigginOut and DaveBoy.

I think Freddie_Snowbits should go forth and multiply (scuse me im not normally so outrspoken but people like this irritate me!)

Good luck to kopicbloodaxe at least youre going in the right direction.

;D

kopicbloodaxe

Thanks for all the support! :-)

I admit that 22k is not ideal, but I don't believe I'm in crisis because I can meet all my monthly payments.

My thinking was that if I can defer the interest bearing payments for 6 months then I'm not losing anything by paying off the CC. Is it not the same as having everything at 0% for that 6 month period? Then once the 6 months are up I can tranfer a chunk of the interest bearing loan to another 0% card?

It all sort of makes sense in my addled brain!

Would I be better off chucking everything (except maybe the 0% debt) onto a 5.8% loan (no deferrals) and then throwing as much spare cash at that as I can?

As for creating some spreadsheets... I'm good, but not THAT good with Excel.

My problem with my cahoot flexible is that I'm stuck at 8.3% (I think that's the rate) and they turned me down in the past when I asked to transfer it to the (what was then) 5.9% fixed rate instead of the variable rate on the flexible loan.

Northern Rock is looking favourite for loans at the moment at 5.8%

Many thanks.

--Simon.

DiggingOut

I think you are confusing something, Simon. You can defer payments, but that is not the same as deferring interest. If you defer payments, you will owe more at the end of the six months then you do at the beginning, because the interest will be running.

Now if it also defers interest, then that is a much better story. But I highly doubt it. Check the terms carefully, I think you will find you are being offered the chance to not make payments, but your debt will increase. In which case it is a very bad idea indeed.

kopicbloodaxe

Good point, DiggingOut. I hadn't thought of that and am sure many, many people will fall for that. I have sent them an email asking them to clarify this.

I also had a look around their website and can't find any Ts and Cs. Not even on the downloadable application form.

So, assuming I were to go with someone like Northern Rock at 5.8%, would it be more sensible to put all my interest bearing debts into there and leave the 0% CC separate? Or should I just move my highest interest debt to 5.8%?

I would feel more comfortable with fewer individual debts and thus fewer monthly payments to meet, but obviously I don't want to pay over the odds.

Really do appreciate your help and advice on this!

--Simon.

DiggingOut

Well, Simon, on your barclaycard £4700 @ 2.9%, you are paying about £11.50 / month in interest. If you move it to 5.8%, you will pay exactly twice as much interest on it every month.

So it comes down to whether or not reducing your debts from 3 payments a month to 2 payments is worth spending an extra £11.50 / month in interest. It wouldn't be to me, but it is your decision.

If you can get a flexible Northern Rock loan at 5.8% for your cahoot balance, that would definitely be worth doing. You want flexibility so you can pay it off quickly, even at 5.8% you will be paying a lot of interest.

You might not get that good of a rate, though, I don't think they give that rate to everyone. Also, extra credit checks don't necessarily help when it comes to doing your credit card shuffle with your 0% debt.

But if I were you, I would still probably try for Northern Rock -- IF it is flexible, but I think it is, isn't it?

Pal

Out of interest, is there any scope to balance transfer more money onto the BC at 2.9%? It is unlikely but if possible it might be worth making use of that to pay off some more of the higher interest loan.