Help with clearing debts!

samjl

Hello, I wondered if someone could give me some advice please?

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

I thought consolidation into a new loan would be a good way to pay off the cards altogether so I've 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.

I'm now wondering if I've done the right thing? I still have the option to cancel the new loan as I've not signed it, but I guess it will show up on my credit file even if I then cancel it?? Will that put them or another banks off in the future if I needed some more money?

The other thing is my other half has offered to pay off the CC now but I will need to pay him back in 4 or 5 months, so would need a loan then if I went for that option...at the risk of getting a higher or lower rate.

Should I just carry on as I am paying the min payments on the CC's and stick with my current lower rate loan??

So confused!!

LAM2011

I am not qualified to give expert advice and there are lots of more knowledgeable people on here to come and along and help but I did a similar thing - I added a credit card to my loan but I made sure that I can make overpayments and pay off early if I need to. 19% interest on a cc and only paying off the interest becomes a dangerous as I found out after throwing money like that away without chipping off the debt. I have now reworked my finances and do every little bit extra (loads of advice and tips on these forums) and will put every spare penny into the loan. All being well I should be able to reduce the terms from 5 years to 3 years.

Good luck

samjl

Thank you for your advice:p

Does anyone know how it would affect my credit score if I cancelled the new loan?

findingmyownway

I'm not an expert in credit scores, but I think the 'new' loan will just show up as a 'search' on your report if you don't take it, obviously there will be no debt to list. I don't think that is anything major to worry about at all, defaults etc would look much worse.


On the original question though.... taking out a loan to consolidate CC debt is rarely a good idea. You need to address why you are only paying the CC minimum. Are you working? Can you post an SOA?

Spreading a £5k cc debt over 5 years will rack up a HUGE amount of interest (even though the APR looks lower). £360/month for 5 years is a whopping £21,600 repayments. I know that covers your existing loan as well, but why swap a 8% loan for an 12% one? Thats crazy.

With some lifestyle changes you may be able to pay of the CCs much faster, thus paying far less interest and getting yourself into a better financial situation much quicker.

Keep posting, we'll keep helping

samjl

findingmyownway wrote: »

I'm not an expert in credit scores, but I think the 'new' loan will just show up as a 'search' on your report if you don't take it, obviously there will be no debt to list. I don't think that is anything major to worry about at all, defaults etc would look much worse.


On the original question though.... taking out a loan to consolidate CC debt is rarely a good idea. You need to address why you are only paying the CC minimum. Are you working? Can you post an SOA?

Spreading a £5k cc debt over 5 years will rack up a HUGE amount of interest (even though the APR looks lower). £360/month for 5 years is a whopping £21,600 repayments. I know that covers your existing loan as well, but why swap a 8% loan for an 12% one? Thats crazy.

With some lifestyle changes you may be able to pay of the CCs much faster, thus paying far less interest and getting yourself into a better financial situation much quicker.

Keep posting, we'll keep helping

Thanks for the advice. Basically I don't earn enough at the moment to pay more than the £150 a month or so that the CC charges are....so yes it seems odd changing to a higher rate with the new loan but...

if I continue paying £150 a month towards the new loan (I can make overpayments) then that would include £75 a month more for the new loan and £75 month overpayment for the new loan....thus enabling me to pay off the new loan a bit sooner. Does that make sense?

I really don't know how I would pay even more than £150 a month for the cards if I don't consolidate, I know the monthly total would go down a bit each month if I could overpay a little....but I couldn't be certain to do it every month...

Interestingly I just spoke to the debt helpline people and they felt in this case consolidation was the right thing to do...given all my outgoings etc...Im even more confused!!!

findingmyownway

samjl wrote: »

Thanks for the advice. Basically I don't earn enough at the moment to pay more than the £150 a month or so that the CC charges are....so yes it seems odd changing to a higher rate with the new loan but...

if I continue paying £150 a month towards the new loan (I can make overpayments) then that would include £75 a month more for the new loan and £75 month overpayment for the new loan....thus enabling me to pay off the new loan a bit sooner. Does that make sense?

I really don't know how I would pay even more than £150 a month for the cards if I don't consolidate, I know the monthly total would go down a bit each month if I could overpay a little....but I couldn't be certain to do it every month...

Interestingly I just spoke to the debt helpline people and they felt in this case consolidation was the right thing to do...given all my outgoings etc...Im even more confused!!!

Earnings and outgoings are all relative. Assuming you have a graduate job (based on that fact you have a professional loan) then I bet you earn more than a lot of people on this board.

Please post an SOA.

Transferring the CCs to lower rate / 0% cards is also an option you should consider.

findingmyownway

samjl wrote: »

Interestingly I just spoke to the debt helpline people and they felt in this case consolidation was the right thing to do...given all my outgoings etc...Im even more confused!!!

Who are the "debt helpline people"?? Not a company hoping you sell you a consolidation loan I hope. Be very careful of the advice you trust.

samjl

findingmyownway wrote: »

Who are the "debt helpline people"?? Not a company hoping you sell you a consolidation loan I hope. Be very careful of the advice you trust.

It was the national debt line https://www.nationaldebtline.co.uk an independent charity recommended by the DSA website, they don't do any finance just advice