Secured Loan - Am i correct?

spacebug

Hello all,

I am considering getting a secured loan (hear me out...!).

I have ~£22K in debts on credit cards. All cards st maximum limits and i'm only paying minimum payments.

My outgoings on debts are roughly £400 per month, but as i said i am paying the minimum so not much is changing in the level of debt. Credit history not great so 0% interest cards seem elusive to me.!

I have a mortgage with ~£47K equity, but i have only just taken out this mortgage. The redemption fee for remortgage is £12,000! So re-mortgaging to clear the cards isn't a good option.

I have had a quote for a secured loan for £22K over 25 years (I know you'll all say it's bad, but please read on..) Payments for this loan are £196 a month

I intend to remortgage in 2 years and settle the secured loan. I have calculated that if i continue paying my credit cards as i am now (and i don't see it changing) the i will pay £9,600 over the next 24 months and my debt will not have significantly reduced.

If i pay the secured loan at £196 per month for the next 24 months i would pay £4704.

I have used a calculator (see results below) to work out what the early resettlement amount would be after 2 years. This works out to be £21,741.

So effectively i haven't actually paid any of my debt off - but i have lowered my payments. When i remortgage in 2 years i will clear the debt.

So the options are:

1. Continue paying minumim payments and spend £9600 over next two years, then remortgage and clear debt.

2. Get secured loan and reduce payments to £4704, the settle secured loan and remortgage.

Please could someone have a look at the figures below and see if they add up. The rebate is based on the 2004 regulations.

I know lots of you will say don't get a secured loan, but if the maths is correct then it is a cheaper option of maintaining my debt until i can remortgage and clear them all..

Thanks, J

Simple Actuarial Rule Rebate Calculation


Loan Details: First Plus 10.2% 25 years
Loan Amount = £22000.00 (time = Zero)

Periods in a Year = Months

Advance/Repayment Details:
Regular Repayment = £196.00 Number = 300 (times 1 to 300)

Early Settlement Details:
Settlement Date = 24
Deferment = None
Original APR = 10.2
Period rate = 0.812673666169%

Actuarial Rule Rebate Results:
Loan Totals ...

Total Amount Advanced = £22000.00
Total Amount Payable = £58800.00 (TAP)
Total Charge for Credit = £36800.00 (TCC)
Rebate Results ...

Total Remaining to be Paid = £54096.00
Statutory Rebate of Charges = £32550.09
Final Settlement Amount = £21545.91
Additional Information ...
Total Paid Before Settlement = £4704.00
Total Paid Including Settlement = £26249.91
Settlement Plus Last Payment = £21741.91

AMILLIONDOLLARS

Hope over to the DFW board, the folk on there will be able to help you. I would be cautious about consolidating not a very good idea, as you are only extending the life of your debts and companies always front load the interest at the begining, so after two years you may end up owing more than you borrowed and sometime you can incurr penalities for trying to pay it off faster

Have a look at this then hop over to DFW:

http://www.whatsthecost.co.uk/snowball.aspx

Good luck
AMD

regularsaver1

10.2% can you not get anything better?

can your existing mortgage lender not do a further advance over the term, you mentioned?>

Chrysalis

I would be surprised that paying it off after 2 years they let you pay less then the original loan their is most likely going to be a penalty of some sort so they ensure they get their interest.