need advice on a loan / credit card situation

harrymetsally

hi everyone - I hope you can help!

I took out a graduate loan with my bank of £5000 at a low rate (about 5.8 I think) 2 years ago and I've been DD-ing it for the arranged £102 a month.

It's worked out so that I have borrowed £6164.42 in total and I am just paying that off with £102 a month for 5 years. So the interest was added on at the beginning. I have £4212.34 left to pay now.

I am very good at creditcard switching and I have 2 at the moment. One interest free for 17mnths for £1500 on an MBNA (this was a bank transfer to get rid of my now charging overdraft). And the other is a Barclays one for roughly £3000 now (various splurges I regret).

I haven't spent a penny in credit for 2 years, I am just managing it all to pay it off.

What I want to know is: both my credit cards are offering further balance transfer deals ... should I transfer my loan onto a credit card? I'm not saving any interest as the interest is already added on, but it does mean I have the flexibility to pay more off here and there. Whereas the loan its the whole amount or the £102 a month?

Does anyone have any advice? I'm basically trying to get all my debt onto one or two cards? Rather than spreading it?

Thanks in advance,
Harriet

Tixy

You'd need to get a settlement figure for the loan to be able to decide if you wanted to move it anywhere else.

Have you actually asked if you can make overpayments to the loan? and if you can what the charge for doing so would be?

You can't do a balance transfer from a card to a loan. You could do a money transfer to your current account from MBNA if its at 0% (though the bt fee will probably be higher).

Is the £3k on barclays at 0%?

What are the limits on both cards?

bankscausepain

NO! I would strongly advise you not to transfer the balance to a credit card.

First, this is likely to incur a fee, usually about 3%. On a balance of 4,000gbp, this will be a high cost to you.

Second, any 0% balance transfer rate will eventually end, and then you are left with the remaining balance to then shift again (and incur more fee's) or see the interest rates raised to around 17%.

Concentrate on getting the current credit card balance down, and continue to pay the loan each month. If it takes 4 more years that is ok - the interest is included so you can't get stung for it.

It is safe as a graduate loan, but certainly not safe on a credit card.

Best of luck.

CLAPTON

harrymetsally wrote: »

hi everyone - I hope you can help!


It's worked out so that I have borrowed £6164.42 in total and I am just paying that off with £102 a month for 5 years. So the interest was added on at the beginning. I have £4212.34 left to pay now.


..................

I'm not saving any interest as the interest is already added on,
Thanks in advance,
Harriet

this is not how it works

the interesst is charged on a monthly basis so if you settle the loan early you save interest (although there can be a modest early settlement fee)

although your loan agreement shows the total cost of the loan i.e. capital plus interest (this is a CCA requirement) there should also be information about early settlement and possible overpayments.

have a look at the agreement

harrymetsally

Thank you everyone. You've been really helpful.

I have 0% on both cards, but I had forgotten about balance transfer fee.

So in conclusion, I should stick as I am.
Pay the loan off each month, continue paying the credit cards off and I'll be sorted.

I'm hoping in 3 years it'll all be gone. All I'll have left is my student loan - which I'll never get rid of! I'll be in a retirement home by the time that goes!

Thanks again fir your help guys, I can always rely on these forums for good advice.

Harriet

Tremour-88

CLAPTON wrote: »

this is not how it works

the interesst is charged on a monthly basis so if you settle the loan early you save interest (although there can be a modest early settlement fee)

although your loan agreement shows the total cost of the loan i.e. capital plus interest (this is a CCA requirement) there should also be information about early settlement and possible overpayments.

have a look at the agreement

Some companies do front-loaded interest, where the loan amount + interest is added together and you just pay monthly so there would be no monthly interest in this case.

CLAPTON

Tremour-88 wrote: »

Some companies do front-loaded interest, where the loan amount + interest is added together and you just pay monthly so there would be no monthly interest in this case.

not so for normal unsecured loans

all unsecured loans under CCA rules calculate interest according to CCA rules and MUST refund interest if settled early (always allowing for up to 2 months interest as a fee).

the fact that the loan agreement shows the capital plus all the interest and the monthly payment are the same each month doesn't mean that the interest is calculated on the falling balance each month.