What Shall I Do

singingsister

I was just checking my finances and discovered this:-

Loan with cahoot - £6661.19 outstanding APR 14.9% paying £135pm (flexible loan so no end date)
Loan with Egg - £12705.77 outstanding APR 6.73% paying £287.20pm (50 months left)
Credit Card with First Direct - £470.80 outstanding APR 17.9% paying 40pm (minimum payment)

Now I spoke to Egg and I can take a "new" loan for the total £19,837.76 for 4 years at £478 per month, which is more than I pay now monthly (£462.20) but all will be paid off in 4 years.

Should I go ahead and pay more in the short term but it benefit me more in the long term or not. I think I can afford the extra - it's not ideal but I think I can. I could always take out loan over longer length of time to reduce monthly payments but I think it will be a shame to extend loan.

Wot do people think I should do?

lynzpower

you need to be clear as to whether you CAN afford the extra
theres a budget planner on the top of the dfw board that will help with this.

singingsister

well I should say that I can - it's only £15.80 a month extra and maybe I'll have make sure I don't spend money on other things to make sure I have that extra.

But it makes sense in the long run right? So I am debt free in 4 years....

Rafter

It makes huge sense.

Based on what you have said it is going to cost you £5,220 in interest to pay off your current debt with those 3 loans.

By consolidating and paying that little exta per month you will be paying £2,722 in interest - a saving of £2,500.

With your current setup and assuming you don't spend any more on your credit card you will be debt free within 7 years - by paying £18 a month more and switching to the lower rate you will be debt free in 4.

If you really are worried about making the payment, why not ask egg to extend the term to 5 years.

You will then only pay £390 per month. It will cost you £750 more in interest though. However, because it is a flexible loan, if you can afford to make overpayments you can bring down your loan term and interest bill.

This will be much better than ending up paying 18% on a credit card each month if you are a bit tight on the budget.

Please try living without a credit card too if you can - or at least using the flexible features of your loan to clear that first - rather than keeping up payments on your loan at low apr, while at the same time paying twice as much interest on your credit card. Remember too that the first time you don't make the full payment on your credit card you pay 2 months interest right back to when you purchased the first item on your last statement. A sneaky trick.

R.

singingsister

Thanks. I think I'll ring Egg and see if they will accept me for the increased loan. Think I'll say 5 years and then make overpayments if and when I can afford to.

mjdh1957

It seems a good idea, but a lot of people (me included) have ended up in a worse situation after consolidation - I did it twice and it was only on the third time that I really took a grip on my finances and made it work. That time, I had an Egg loan and ended up paying it off 3 years early.

I'd recommend cutting up the credit cards and making and sticking to a budget. And make as much ovepayment as you can. That way, you are saving even more interest payments and end up debt-free much earlier.