Should I consolidate now??

samjl

Hello, I'm in a bit of a pickle over what to do about my existing debt, I wonder if anyone can help?

I took out a Natwest Professional Trainee Loan in 2005 for my uni course, its basically a fixed rate loan at 7.9% for the rest of the period, 4yrs left. I have £10100 left to pay, current repayment is £285 a month.

I also have approx £5500 credit card debt split over two cards, both at 19% interest. I only pay the minimum so around £150-160 a month:(

Now my boyfriend has offered to lend me the money to pay off the credit cards now, £5500, but will need it back in April/May next year to fund a trip he's going on.

I've also spoken to Natwest and they can do me a new loan for the full amount £16000 at 11.9%, new repayment rate would then be £360 a month for 5yrs. So my monthly outgoings would be approx £80 less and no credit card debt but it would be for a year longer than my current loan.

So either I take up my boyfriends kind offer and then try and get another loan or consolidate in April/May when he needs the money back (but of course the rate may go up) or I take the Natwest one now....

I reckon if I took his 5K now then I would save myself £150 a month in credit card repayments for 4 or 5 months until he needs his money back, plus I would have paid off my credit cards and overdraft and hopefully have a better credit rating. My credit rating is good at the moment (was poor a couple of years ago hence why I didn't transfer my credit cards to a 0% balance)

My fears are that they did a full application today for the new Natwest loan, I still have the option to cancel it, but I guess it will show up on my credit file even if I then cancel it?? Will that put them or another bank off when it comes to applying again in 5 months?

Your help much appreciated!!:j

samjl

Anyone?? I'm a little worried I was a bit quick to accept the new loan!! I've not signed anything yet, waiting for the paperwork to come through

arbroath_lass

samjl wrote: »

Now my boyfriend has offered to lend me the money to pay off the credit cards now, £5500, but will need it back in April/May next year to fund a trip he's going on.

Circumstances may change. What would happen in April/May if you couldn't get another loan?

There's a sticky at the top of this board about lending to family or friends. You and your boyfriend should read it before you decide to do this.

Sorry can't advise on the rest.

Poosmate

When was the last time you used your credit cards?

samjl

Poosmate wrote: »

When was the last time you used your credit cards?

One of them, Virgin, years ago- its on a fixed rate until paid off type deal, to avoid paying a crazier rate

The other one...4 or so months ago

InsertWittyName

I personally wouldn't.

The majority of your current debt is at 7.9% - there's no way I would voluntarily swap to paying 11.9% for the same.

What kind of APR could you get just to consolidate the £5.5k credit card debt?

If that doesn't work out cheaper then to be honest 19% isn't all that bad for credit cards (some of mine had risen to 29.9%!)

I'd also avoid borrowing off family, it's really not worth any emotional strain!

katsu

Work out how much more it costs you over the 5yrs versus 4yrs of current loan plus whatever you can afford off CCs.

Can you perhaps get an overdraft or even find out how much you could get on a credit union loan etc - so you could borrow some of his money for a few months to reduce your CC debt and have a way of paying him back in time?

samjl

The problem is I can't really afford more than the minimum on these cards at the moment, plus I really want rid of them!!

I do worry about cancelling the new loan and the effect that would have on 1) my credit score and 2) the chances of getting an affordable loan in 5 months (should I go for the option of borrowing from my boyfriend)

Maybe I should just keep the current loan and cards....I just feel like I'm not getting anywhere with the debt and by getting the cards paid off it would feel a bit like some progress was being made??

Arghhh I really don't know what to do!!

Poosmate

I think I'm with IWN. At least with your credit cards you know you can make the minimum payments and the best way to pay them off is to make additional payments to the one with the highest interest rate whenever you can.

Consolidating debt is never good especially if you still have credit cards that you can run the debts up on again. Believe me, I've been there, done that, bought the T Shirt and still have the debts to prove it. Keep your debts as they are and feel the pain as it will be the best lesson you ever learn financially.

Poo

samjl

Hmm, the thing is that if I do take the new loan the extra £75 a month I will have to pay out will be half the cost of the CC repayments....is this not a good thing??

Poosmate

samjl wrote: »

Hmm, the thing is that if I do take the new loan the extra £75 a month I will have to pay out will be half the cost of the CC repayments....is this not a good thing??

Not necessarily. If you take the loan and pay off the credit cards will you 100% destroy the cards and close the accounts? And for the next 5 years are you certain that you will not need any more credit?

At the moment your credit cards are fluid. You can make the minimum payments or you can overpay. I know it's really hard when the totals don't seem to be going down but even making an overpayment of £1 will make a difference.

What are the interest rates on your credit cards? And what's the interest rate on your overdraft and how much of it do you use each month?

Sorry for all the questions but it is relevant.

Poo