Help / Advice with ill advised loan

jim3077

Please could i get some help/advice. This is my first post so please bear with me. I took out a loan to pay for a new boiler 2 years ago. At the time the payments sounded great - just £40.00 per month. However, i stupidly agreed to a 10 year term and i actually am only paying off £7 per month the other £33 is interest and i will be paying this for another 8 years. Like a lot of others i guess, a new year means trying to get on top of finances and my question is: I want to pay this amount off much quicker. Am i best taking out a new loan to pay the existing loan off increasing my monthly payments or would i be better getting a 0% credit card for spending, pay the existing loan and increase my monthly payments to pay the debt off. Any advise would be great!:)

Following the replies (thanks so much!!) the boiler cost just over £4000. We paid £1900 so loan for rest of amount = £2100 roughly.
Just want an alternative to paying for next 8 years. We have just under £2000 left. Could i clear with a credit card that gives 0% on spending as have seen some good offers on MSE!

jc808

Jesus, thats a high APR

Where did you get the finance from? Whos supplying the boiler?

Does this '£33 interest' include MAINTENANCE COVER as well? (check, this is important)

TrueUnitedFan

If i'm right, your paying 4800 over 10 years?

Not that bad as i first thought.

somethingcorporate

If it's for a boiler that only cost £2,000 it does seem a lot to pay!!

Check your original loan agreement to see if there are any penalties for paying it back early and check the APR. This will give you an idea as to what the best route would be for funding over the next 4 years.

iolanthe07

£7 per month the other £33 is interest

This is not as bad as it seems. As the years roll by you will notice that gradually the interest element will go down, while the capital repayment element will go up, so towards the end of the term these figures will be reversed, and you will find that one month you pay £33 capital and £7 interest. It is how these loans work, so as to keep monthly payments constant, but it can seem alarming to the uninitiated. Mind you, ten years is a hell of a long time to pay off such a small amount, so you will pay a lot of interest.

Tixy

Its hard for us to judge whether its a good deal/good APR without knowing how much the boiler was or what APR you are paying. £33 interest/£7 capital in 1 particular month isn't enough on its own for us to judge.

But no matter the APR paying back only £40 a month over such a long period is likely to cost a significant amount in interest.

You say you want to pay it off quicker - how much can you afford a month? Have you checked if current loan allows overpayments?

jim3077

jc808 wrote: »

Jesus, thats a high APR

Where did you get the finance from? Whos supplying the boiler?

Does this '£33 interest' include MAINTENANCE COVER as well? (check, this is important)

I know, its terrible. It was through British Gas (GE Money doing the finance) . I'm so gutted we took it - we just looked at the monthly payment and went "well its within our budget so its ok". Its more the lengthy term as £4800 for £2000 over 10 years probably isnt that bad. I can probably afford to up the monthly payment to £50-£60. Really want to try and be debt free before my first kid starts high school - 4 and half years. Got credit cards sorted - 0% balance transfers - but this loan is annoying, cant face another 8 years.

jim3077

The boiler was just over £4000. We put down £1900. Will contact loan co. to see if they will re negotiate terms.

jim3077

jc808 wrote: »

Jesus, thats a high APR

Where did you get the finance from? Whos supplying the boiler?

Does this '£33 interest' include MAINTENANCE COVER as well? (check, this is important)

No maintenance cover - British Gas installed

Tixy

Looks like about 20% APR.

Its unlikely that they will accept payment by credit card (and even if they do it might not be treated as a purchase).

You could consider a 0% super balance transfer card (aka money transfer card). Only a few cards do these transfers, where you put money into your current account and then use that to pay off the loan.
These are not the easiest cards to get - need a good credit history etc, and obviously it depends on what cards you already hold etc. And they incur a balance transfer fee.

Though the 0% deals would run out before you'd paid off the full debt if you can only afford £60 a month, and could then revert to a higher APR than you are paying now. So look into it carefully before making a decision.

jim3077

TrueUnitedFan wrote: »

If i'm right, your paying 4800 over 10 years?

Not that bad as i first thought.

Suppose it's the term of the loan - another 8 years for a relatively small amount. Just want shorter term even if means paying more per month