Tackle £4k loan - Virgin Money Transfer or find cheaper loan

tsb88

Hi,

My friend has around £3.3k remaining on a £4k loan at a pretty hefty 24.9% APR, plus around £1k on an overdraft. The payments to the loan are £100 a month.

They would like to try and reduce the cost of the loan if possible, not least because at the same time they are saving up for a wedding in just over a year. There credit report seems fair, have one credit card with good payment history and no defaults/missed payments.

I was thinking about it and could think of a couple of options, and am interested in different opinions:

1. Try to get the Virgin Money Transfer card, transfer the balance into a current account and use this to pay off the loan (doing the trick of paying off most of it, but not fully initially to avoid the early settlement fee, which seems to be ok looking at the t+c's). They would be unlikely to clear the debt before the 0% period expired, but could balance transfer to another card at that point. So assuming they got accepted for the card, and the limit was high enough, it would be a 4% fee to clear the loan (the money transfer fee). Of course the limit might be £250 or something which would make it pointless.
2. Refinance the loan with a cheaper provider (hopefully), perhaps try for the Sainsbury's 7.8% loan. If accepted would be much cheaper than it is now, but probably more than option 1 if it was done right.
3. Open to suggestions

They are also considering upping the value of the loan slightly (to £5k), but hopefully for a cheaper rate that it is currently of course, in order to have some money to put towards the wedding. This seems like a bad idea to me, because for that a credit card is likely to be cheaper for the additional £1k.

Is there some better option I've overlooked? Or would you do one of the above?

Thanks

YorkshireBoy

tsb88 wrote: »

My friend has around £3.3k remaining on a £4k loan at a pretty hefty 24.9% APR, plus around £1k on an overdraft. The payments to the loan are £100 a month.

Assuming no PPI, those numbers equate to a 7 year term...and they're just over 2 years into it?

Of course the limit might be £250 or something which would make it pointless.

Getting £1K would reduce the interest on the overdraft.

2. Refinance the loan with a cheaper provider (hopefully), perhaps try for the Sainsbury's 7.8% loan.

Unless there's been some major improvement in income over the last 2 years, it's unlikely they'll get a loan 2/3rds cheaper than the last one!

They are also considering upping the value of the loan slightly (to £5k), but hopefully for a cheaper rate that it is currently of course, in order to have some money to put towards the wedding. This seems like a bad idea to me, because for that a credit card is likely to be cheaper for the additional £1k.

It seems like a bad idea to me because it means they'll be deeper in debt!