Is this a good idea?

madmalteaser

I've just had a phone call from my bank regarding my current loan with them. At the moment I have a loan with an interest rate of 14.9%. There is about 8400 left on the loan and 4 more years of paying it off. The woman at the bank said she think she can re-jig it so that I can re-finance that loan along with my credit card which has a balance of 1700 on it. The new loan would have an interest rate of 11.9% and be over a period of 5 years. I asked her if I could think about it and she's booked me in to see her tomorrow afternoon.

I'm trying to get my head round it and what I'm hoping you guys can tell me is if this sounds like a good idea. I know the interest rates will be lower, but it does mean I'll be paying it off for longer. The monthly payments will be about the same as what I'm paying now so I'm not gaining or losing anything there, well, apart from the fact that I won't be paying off the credit card anymore which is something to seriously consider as I have 2 other cards that I'm paying off each month too at the moment.

So, should I go for it? And also, do you think I should push to include my overdraft (£850) in the whole thing too? Help me someone! Too many numbers and equations and this maths idiot can't figure it out!

jonesMUFCforever

I think overall you will be saving money (just) but prepare for the hard sell of PPI.
Why don't you tonight search on Google for payment protection policies, print them out and take them with you and watch them squirm!!!

madmalteaser

Thanks ejones - I was definitely prepared and what a hard sell it really is! Do these people get some sort of commission out of that or something?

Anyway, further to what I said before, I went in to the bank this afternoon for my appointment. The bank, has agreed in principal, a loan of 10,100 (which I think is wrong - I asked her to cover my overdraft in that but I'm sure the numbers don't add up) and for some reason that is at 13.9% rather than 11.9% that was promised yesterday. Still, I haven't agreed or signed anything yet so I can sort that out.

That is a consolidation of my current loan with 8400 left, four years to pay at 14.9%, my Barclaycard with 1700 with an APR of 18% or so, I forget the exact figure. The loan would be over a 5 year term and I've made a definite no to the PPI - thank you very much. The monthly payment works out at £4 more than what I'm currently paying. So, does this actually sound like it's worth it?

Yes it's a slightly lower interest rate, but it is over a longer term, and I know it's not going to take me 5 years to clear my credit card. Do I, or don't I? That is the question.

mrcow

The only way that you can work out whether you are going to be better off is to sit down and do the maths and compare the figures for do you or don't you. For example (my figures may not be exactly what you have so adjust as required).

1. If you take the loan:

£10100 at 13.9% over 5 years is £230 per month or £13815 in total.

2. If you don't take the loan:

Current loan: £8400 over 4 years is £229 per month or £11012 in total
PLUS
Credit card: £1700 at ? how much interest will you be paying whilst you pay it off? So by these figures, if you are planning to pay your credit card company any more than £1000 interest, then it's better to take the new loan.

If not, then perhaps pay off your credit card ASAP (chuck all you can at it or convert to a 0% deal?) and then concentrate on the loan?

Obviously it's down to whatever you feel most comfortable with.

I don't understand where the overdraft is coming into it?

madmalteaser

mrcow wrote:

The only way that you can work out whether you are going to be better off is to sit down and do the maths and compare the figures for do you or don't you. For example (my figures may not be exactly what you have so adjust as required).

1. If you take the loan:

£10100 at 13.9% over 5 years is £230 per month or £13815 in total.

2. If you don't take the loan:

Current loan: £8400 over 4 years is £229 per month or £11012 in total
PLUS
Credit card: £1700 at ? how much interest will you be paying whilst you pay it off? So by these figures, if you are planning to pay your credit card company any more than £1000 interest, then it's better to take the new loan.

If not, then perhaps pay off your credit card ASAP (chuck all you can at it or convert to a 0% deal?) and then concentrate on the loan?

Obviously it's down to whatever you feel most comfortable with.

I don't understand where the overdraft is coming into it?

Thank you for that. What you've said makes a lot of sense. I did say to my other half the other day that it's certainly not going to take me 5 years to clear the credit card. The overdraft - I was going to tell the bank to put enough on the loan to cover my existing overdraft. I figured another couple of hundred quid wouldn't make too much of a difference and then that's 3 things I wouldn't have to worry about. I'm going to think about it a little more, but at the APR the bank has offered, I'm not exactly impressed with the offer. At the moment, I'm of the mind that I'm just going to leave everything as it is. But thanks again for your imput. You've been a big help!