Confused...loans /credit card

Toomuchdebt

Had a quote for a loan last week to pay off my credit card of £8000 which has an interest rate of 27.9%.The loan was 7.9% and over 5 years so quite a difference but there was only £20 difference in the minimum payments-I don't understand that.I was expecting the loan payments to be much lower, not just a little bit lower.

doodah

hey, is that not because with a loan your payments are to pay off the whole amount, whereas with a credit card your min payments are more or less just paying off the interest, so the payments will be for a lot lot longer

CLAPTON

if you're currently repaying say 3% off each month with a credit card at 27.9% APR on a balance of £8000, in 5 years time you will still owe about £4,600 and in 10 years time you'll still owe about 2,600.

never only pay the minimum on credit cards.

clarab_3

the credit card, you would have being making next to no progress on paying off the capital - it would take until september 2015 to pay off!

whatatwit

TMD, the loan would clear your debt quicker, but you must ensure that you get rid of the card. If not, unless you resist temptation, you will end up with a loan and a credit card with a large amount owing.

Could you not get a balance transfer for the card to a lesser interest rate than you are on now?

Toomuchdebt

Ah that'll be why then-I can't get any balance transfers-credit rating is rubbish at the mo due to having too many cards.I pay more than the minimum on the cards(just) and all but 2 of my cards are on 0% or very low for life of balance and I am hoping to be able to start paying off more in the New Year on my 2 large interest cards.I definitely want to get rid of all my cards except one(with a low limit of £500 for emergencies,booking plane tickets etc which will be paid off in full each month) and I beleive I'm looking at a debt free date in around 8 years time at the moment but hopefully sooner.

whatatwit

Keep at it TMD, I'm sure the figures will start to come down.

What's your next target to get rid of?

Toomuchdebt

I was going for the small balances at first but they're all on low or no interest so I just want to pay off as much as I can of the 2 MBNA cards as I can as soon as possible.The Morgan Stanley will be the next card to get paid off out of the smaller ones simply because of the balance on it being the lowest I think.

CLAPTON

just to be very clear, my comment about on never paying the minimum on CCs doesn't apply for multiple CC debts....here you need to snowball..that is pay the minimum on all debts except the one with the highest APR, on that you pay as much as possible until its cleared off and then move on to the next highest APR
try your debts in the snowball calculator
http://www.whatsthecost.co.uk/snowball.aspx

Toomuchdebt

yeah have done that-I pay the minimums on all but the 2 with high interest-they get an extra £10 each as they are both similar interest rates and have similar balances and the Abbey Visa one was getting dangerously close to the limit too so I thought it was better to pay extra on both rather than just one in case the Visa interest rate went up even more and took me over my limit with the added interest IYSWIM-was that wrong I wonder?

whatatwit

No, I think that giving yourself a little cushion with the Abbey one was sensible.
I think that whilst it may not always be the most money saving thing to do, if one month you can clear and close a card by using all your spare cash to do it, then it can be a real boost and it feels as though you are getting somewhere.