Loan advice needed

Liz12241

Paying off £7500 loan to LlyodsTSB @ 6.9% over 7 years (£112.00 Monthly). Still to pay £5500 in just under 5years. Any ideas where I can get cheaper rate? I don't have a credit card, but would be willing to consider one if the deal was right. Thanks to all financial wizz-kids out there.

YorkshireBoy

Can you afford to pay £165 per month?

Liz12241

It's pushing the boat out a bit, but I suppose I could. What's the bottom line?

YorkshireBoy

With the exception of MBNA run cards (at £5 during an introductory period), most 0% credit cards have 2% minimum payments. This would equate to £110 per month on your £5,500 debt - very nearly what you're paying now.

The problem with shifting a loan to a 0% card though, is that you will be changing deals every 6/9/12 months and paying a 2/2.5/3% fee each time to do so. The costs of such an approach could be significant over 3-4 years.

Many people in your position therefore opt to transfer their loan to a life of balance (LOB) product such as the M&S 3.9% APR card via Egg Money. The problem with this approach, and hence my earlier question, is that the M&S card minimum payments are 3% (in your case, £165). However, the flip side is that you repay the debt much quicker and it costs you less.

For an explanation of the methodology, check out the Egg Money card trick article, and substitute the M&S card for the 0% cards mentioned in the article.

Finally, don't forget to factor in any early settlement penalties your loan has.