Paying off loan with another loan

kueitka

Hi,

I took out a 10k loan at 14.1% apr about 18 months ago. With overpayments i have got this down to 7k settlement fee. I want to pay this off with a loan with a lower cost. I have option of credit union loan at 10% apr. Should i take maybe a lower rate with a 'high street' provider? Would CU be more flexible? How would any of this affect my credit rating?

Cheers,

k

Mikek_3

What would you save by doing this?
I think you should just battle on and pay it off if you can.

kueitka

at 10% i would save about 3k (estimate, figures not at hand) and pay it off a year earlier.

Mikek_3

how long is the loan for?I dont think you would save £3000

paddyrg

Hiya, did you actually crunch those figures or are they best guesses? Once you take off arrangement fees, redemption fees, etc i'd be surprised if we were talking 3 saved grand over 7 grand remaining with a 4% APR difference.

pamelamalcolm

Once you loan to pay off another loan, how will you pay the other loan then?

MFWannabe

Hi
I would agree with Paddy; you wouldn't be saving 3k by changing to a new loan
I would either continue with the loan you already have and continute making overpayments; that way you'll pay it off earlier anyway
Or (dependant on your income) you may be able to get a 0% credit card or low life of balance card to pay off the loan; but to do this you need a card that allows super balance transfers (where you can make a transfer into your bank account and therefore pay off your loan). There will be a transfer fee to pay of approx 4% but this should work out cheaper

drew2k9

i think it would work out cheaper if you can get approved for it, but thats likely to only be the Credit Union who will do this, apart from that, i have always said and will continue to say, getting loans to pay loans is usually bad, it is part of a vicious circle of loaning, paying, loaning to pay, to then loan again... not good. but if your plan does work then good luck to you and i hope you are debt free asap!

chalkie99

pamelamalcolm wrote: »

Once you loan to pay off another loan, how will you pay the other loan then?

Read the post!

He is not talking about consolidating. He appears to be not only paying his loan but actually managing more than he has to so his question is very good. It just needs the actual figures worked out to see if the plan is workable.

kueitka

Ok, my sums (all a bit ball park, but i think reasonable)

Paying off current loan without looking for a better deal = 234.15 x 45 = £10536, ends Sept 2014 (doesn't include overpayments though). Overpayments to date = £956. So might be about 40 months (£9366), ending June 2014. Settlement fee by April will be £6800.

If got CU (or other loan) at 10%.. borrow £6800 over 30 months, , but repay at £250 instead of £234.15 (which i can do without a problem). Ends ends a year earlier (Aug 2013). Total repayment £7492.82.

Am i missing something?

Does CU loan affect credit rating? Does paying off loan early affect credit rating?

paddyrg

If the settlement in April is £6800, let's use that as the basis for the figures - you either pay it off with 14.4% interest for 4 yrs, or 10% for 4 yrs (very crudely). At 14.4% the total interest is £2,184.99, at 10% the total interest is £1,478.35 - so you'd save ~£700?? Now I'm totally confused too...but hey, £700 is £700 ;-)