Help me do the right thing! Loan application approved

Thebestcracqui

Hi there,

Sorry this is a bit long.

I’m after some advice about a loan I was recently approved for. I cumulated some debt was I was in my late teens/early twenties, and haven’t been great about getting in sorted until the last couple of years. I’m now down to about 5700.

Since November I’ve been getting my credit report in order (electoral roll, closing old cards/moving the addresses etc.). Although I was extremely tempted by the 0% balanace transfer offers I’ve seen I decided to apply for a loan to consolidate my debt because I liked the idea of knowing it was over a set time and after that I would be debt free, and I thought I had a better chance of getting a nearly 6k lending on a loan than a credit card (I don’t know if this is true). I have missed payments previous to two years, but nothing since then (and no ccj’s or anything like that). My debt is currently spread over three credit cards.

I applied for Sainsbury’s small loan, hoping to get the typical APR of 7.8%. I actually got 9.9, so my loan of approx 5700 will cost me around 6500 over the life of the loan . So apart from the fact that it’s a little more than I would have hoped, I have received the paperwork and it is paining me slightly that this loan will cost me £800 (although that’s nothing compared to the interest I have been racking up since my 0% balance transfers last ended whilst sorting out my credit file).

So anyway to cut to the question, should I:

1) Take the loan I’ve got, be grateful for it and look forward to being debt free in March 2015
2) Try and apply for a different loan with a better interest rate (likely to get one?)
3) Try now and apply for a credit card for £6k with 0% over as long as possible and if I get it for £6k take that instead (this is the most tempting, but I am very worried if this will this affect my current application in anyway?)
4) Try and apply for a credit card with 0% and if I get one that is less than £6k just accept it and reduce my loan?

Any advice is much appreciated.

chalkie99

In your situation 9.9 sounds very good and I would think you will find it hard to better.

Take the loan and forget about credit cards which will be tempting you to use them every time you see something you think you want.

spadoosh

Take the loan and see if your allowed to make overpayments, your normally not with smallishh loans but could be worth checking out, while you have the forms see if it allows a certain percentage over payment, then at least you migh pay it off earlier.

Without salary and so on its hard to tell if youd get a 6k cc, but i do think its unlikely at 0% given the few missed payments etc.

Would say the loan is the best option unless you think you could just mash as much as you can in to paying off your cc this year, and only paying the interest for a few months but guessing this isnt feasible hence the loan.

rdchick

I'd say forget the loan, consolidation is hardly the right choice and it sounds like you'd be tempted by credit cards in the future thus leading to more debt. I did this in 2010, had £3500 debt then now have £8,000 debt now. Fun.

Why not up your income and pay off your debts that way, save yourself some money and check out the snowball calculator and see which order to pay your debts back without spending a fortune on interest.

Up to you, will probably get shot down in flames but I personally don't think consolidation works xxx

Thebestcracqui

Hi thanks for your replies, much appreciated. I haven’t actually spent on my credit cards for over 4 years and don’t think I would be tempted to do so, but I think hearing a reality check that I’m probably quite lucky to get what I have is good for me! My salary is 24k, but what I don’t want to do is either jeopardise the loan I have now been approved for or damage my credit report in anyway. RD Chick, thanks for your message, although apologies, I’m probably being stupid but I’m not sure what you are advising though by up your income and pay off your debts – are you suggesting I just stick with my credit cards and just pay them off? I’m currently paying minimum payments on all of my cards which is amounting to about £180/month of which only about £55 is actually going to paying of the cards – the rest is interest due to the high rates at the end of my previous 0% transfers, which I realise isn’t a good advert for me getting another card!

rdchick

I was in a similar situation last year, however I had run out of options and had no chance of getting a loan (I don't have a large income) so I had 2 options, DMP (debt management plan) or upping my income. I eBayed everything I could, got a little cleaning job on the side (get an extra £200 a month for a few hours a week) and I should be debt free by this time next year. You're on a pretty good income for a small amount of debt and with a bit of careful spending (or not spending as the case maybe) you could be debt free by xmas xxx

CLAPTON

spadoosh wrote: »

Take the loan and see if your allowed to make overpayments, your normally not with smallishh loans but could be worth checking out, while you have the forms see if it allows a certain percentage over payment, then at least you migh pay it off earlier.


.

all unsecured loans allow overpayments

CLAPTON

Thebestcracqui wrote: »

Hi thanks for your replies, much appreciated. I haven’t actually spent on my credit cards for over 4 years and don’t think I would be tempted to do so, but I think hearing a reality check that I’m probably quite lucky to get what I have is good for me! My salary is 24k, but what I don’t want to do is either jeopardise the loan I have now been approved for or damage my credit report in anyway. RD Chick, thanks for your message, although apologies, I’m probably being stupid but I’m not sure what you are advising though by up your income and pay off your debts – are you suggesting I just stick with my credit cards and just pay them off? I’m currently paying minimum payments on all of my cards which is amounting to about £180/month of which only about £55 is actually going to paying of the cards – the rest is interest due to the high rates at the end of my previous 0% transfers, which I realise isn’t a good advert for me getting another card!

9.9% is not a bad rate and a lot les than your cards

although a 0% BT may seem attractive, at the end of the promotional period the APR will rocket.

take the loan and overpay as much as possible.

Cash_Flow

CLAPTON wrote: »

9.9% is not a bad rate and a lot les than your cards

although a 0% BT may seem attractive, at the end of the promotional period the APR will rocket.

take the loan and overpay as much as possible.

What he said;)

stusan

Hi

I am a newbie but have found myself in a similar situation.

9.9 does sound good in your current situation but make sure you check what it will go up to and that you can afford that payment when it does.But also your income does sound good so look into every option before you go ahead.

If you cant make over payments on that type of loan but would be able to put away say another £50 in a saving account each month then this will help you pay it off earlier. I also put away the money I would have used to pay my council tax in February and March. It all helps.

Over a 19 year period of my ex husband not paying maintenance for our sons I incured £22000 of debt with 2 loans, 2 credit cards and car finance. I had no other choice but to consolidate it all 5 years ago. On 1st March 2012 I shall finally be debt free and cant wait.I put away extra money each month on top of the loan figure and will be able to pay it off 2 years early saving myself £1080 in interest.

Good Luck with whatever you choose, just think about being debt free.

chalkie99

stusan wrote: »

9.9 does sound good in your current situation but make sure you check what it will go up to and that you can afford that payment when it does.

This is wrong.

The OP has already said it is a Sainsburys loan so the interest rate is fixed for the duration of the loan.