Loan vs. Credit Card - Rock and a Hard Place

MyKindaCompany

Hi all,

Not to use that old get out clause, but Im sorry if i've posted in the wrong bit of the forum. So many areas seem to fit this question, so I have no idea where it should go!

I'm looking to clear my student overdraft of £1600. At the minute, I bounce between -£1600 and £0 every pay day and soon Natwest are going to cut the limit down to £800 (July). I can't afford to save that amount of money in the time, but would rather pay the whole thing off asap.

Additionally, I need to find around £1500 to pay the insurance on my first car. Currently I am learning to drive, but need to pass and get on the road pretty sharpish because of my job. I have a car already, so its only a case of getting the insurance sorted once i've passed.

Finally, I have costs for a friends wedding in September that I need to pay. We're travelling to Cyprus for two weeks, so with flights and accommodation costs I can see this hitting £1000. I realise that this is a bit of a luxury given the situation, but it's for a very very close friend where, for stupid reasons, it would cause a hellava lot of problems if I pulled out now.

All in all, I need to borrow around £4100, but feel that slightly more would help me with a few other money problems I have (for example, having to take a month un-paid leave in August from work. I've managed to sort out freelance work for this, but it only hits £600 rather than the £1000 I take home each month normally)

I've read Martin's website, and it seems like a credit card with a SBT would be a good idea, but I doubt I can re-pay in the time limits set. Failing that, I was looking at the Sainsburys loan of 8.2% over 3 years.

This overdraft is the only debt I have and the only other repayments I make to anything else are my rent, mobile etc. There is a slight hidden catch however of some self-employed work I did before my current job. This means there will be a tax of around £800 I'm going to have to pay come return time.

Am I being stupid to consider taking out money when I should have saved before? :S I'm not quite sure what my best plan of action is.

Thanks in advance

Tixy

Hi

Given the info you have posted I would think the chance of getting a SBT card with a high enough limit to borrow £4100 is fairly unlikely.

Have you had any previous credit cards? What other accounts show on your credit file aside from your overdraft?

What is your gross income? how long have you been at your current job? is your job full time and permanent? if so why do you have to take unpaid leave in August?

Again getting a loan for that amount may be a bit difficult given what you have posted, although its possible you may be able to, but it may well be the case that even if you are accepted its at a higher APR than the representative one.

Firstly have you worked out a detailed budget to work out how much you can afford to put towads all these items a month if you strip everything else back to essentials only - after all you have a few months until the overdraft and you don't yet know when you are going to need car insurance if you haven't yet passed your test.

Have you also then worked out a budget as to how much you can afford to pay back each month assuming you could get that amount of a loan? and if you do pay for your first car insurance on a 3year loan will the loan repayments still allow you to save up for next years car insurance, as you can't keep paying for each years insurance on loans.

MyKindaCompany

Tixy wrote: »

Have you had any previous credit cards? What other accounts show on your credit file aside from your overdraft?

No, never before and I have two other accounts. One is a joint account that was only used to house bills when I was at university (which might as well be closed now), and the second account is a current account with no overdraft that I simply use to hold back money for rent etc.

What is your gross income? how long have you been at your current job? is your job full time and permanent? if so why do you have to take unpaid leave in August?

Gross income is £13000, and i've been in my job since last November. The position is full time and permanent, but the reason for the unpaid leave is to do with the company trying to save money. (I work for a theatre who relies on Arts Funding to survive, with the Arts Council cut ups and various other things, each department is being asked to save £5k. One way of doing this is for some of us to take a month unpaid leave)

Firstly have you worked out a detailed budget to work out how much you can afford to put towads all these items a month if you strip everything else back to essentials only - after all you have a few months until the overdraft and you don't yet know when you are going to need car insurance if you haven't yet passed your test.

The reason for the £800 shock was that I though that it was only going to be reduced by £400 not £800. I haven't received anything from Natwest since my account went from a student to a graduate so was working from sketchy memories from 2007 when I first took out the account. Thank god I went in to check!

As for the driving, its going to be (hopefully) soon i.e. before August. If possible, I would build an extra £500 into the loan to take a intensive course. It's becoming quite difficult not having the license so I'm pushing quite hard to get it finished.

Have you also then worked out a budget as to how much you can afford to pay back each month assuming you could get that amount of a loan? and if you do pay for your first car insurance on a 3year loan will the loan repayments still allow you to save up for next years car insurance, as you can't keep paying for each years insurance on loans.

I can afford around £150 per month to as an excess once everything has been scaled down. I should have really been saving this up until now, but have been a little rubbish... (dont hate me!)

Hmm... :S Not looking great...

geekinaseat

I don't know if you really want to hear this or not but this is my advice.

Think very carefully if you can afford to run a car at the moment. It is a huge addition to any budget. If you remove the driving from your current list of wants and sell the car you reduce your need for debt drastically and also improve your budget to the extent that you might be able to service a small loan/credit card to cover your loss of a month's pay and repay your student overdraft.

The wedding, if there was any way of getting out of it, I would but I understand that sometimes social pressure is so much that it is nearly impossible.

I have debt, it's been really hard getting out of it but soon I will be. If I made these hard choices earlier it would have been much easier in the long term. Have a read through some of the dfw boards and hear peoples stories about how the problem started, it might just change your mind about borrowing too much.

CLAPTON

as you have never had a CC before you are unlikely to get one with a SBT and you're likely to get a credit limit of 500 - 1000

if you can only afford to repay at about 150 pm then you are looking at 2-3 years to repay the debt... in that time the APR of the CC will be about 25% and you will need to re-insurance your car in 12 months .. where will that money come from .. another loan?

relaistically unless you have additional income you can't afford to run a car, take unpaid leave from work and go on holiday to cyprus.