£12,000 unsecured loan @ 9.8% 5 Years Good?

BugsyBrowne

shaun1988 wrote: »

Bit off topic lol but audi tt 3.2. Has been a lot of fun but I've had fun now and want a car with more than 2 seats!!

Nice choice.

geoffky

You are living beyond your means...it will bite your ars-e one day..

tell_it_how_it_is

It does seem like you are a car crash waiting to happen ... and I mean your finances, not your Audi.

You don't NEED a 9.8% long term loan to show you're serious about tackling this - you need some self-discipline to work at it month-to-month right now.

Personally, I'd be working on swapping out the car and getting rid of the RBS 0% ASAP, before moving onto the other loans. Maybe consider a smaller loan in 6-12 months if not cleared and high interest charges have to kick-in.

And finally, if you're training to be an accountant, shouldn't you be 1) quite good, or au fait, with money, and 2) tackling this in the cheapest way possible?

BlackDog23

I've got to agree completely with the post above. You don't need to be signing yourself up to £3,000 in interest over 5 years to tackle your debt. You need the "self-discipline to clear your debts in the cheapest way possible" to quote the post above. I'm currently trying to do the EXACT opposite to you. Pay off a 10k loan charging 9.9% as quickly as possibly by trying to shift some of it onto 0% cards, and overpaying. I'm trying to become debt free whilst incurring the least amount of interest possible, whilst your idea seems to be the opposite.

Sell the audi, and clear the secured loan, which will be the most expensive debt. Then use as much of your earnings as posible to clear the credit card with the shortest 0% period first. You could buy a car for under 1.5k which would last longer than one costing 3.5k. Its not about the price because anything could happen no matter what you spend, its about doing your research on what is reliable and cheap to run, and finding one which has been looked after. May I suggest a Peugeot 1.4HDI around 2003, its a bit of a step down from your current car, but 65mpg, £30 road tax and cheap insurance will save you a small fortune.

You need to have the discipline to use as much money as you can save each month towards clearing your debt, starting with the most expensive and shortest 0% deals first. If a 0% deal is coming to an end and its not paid off try switching the balance and just pay a 3% fee for switching.

If you do decide you need a loan you need to try and make it as small as possible to start with, that means selling the car first to clear the 7.5k, paying off the shorter 0% cards to hold off as long as possible, and not taking extra money you don't currently need as a 'buffer', because if you do suddenly need extra money then you can just use a credit card or take out another loan, why pay interest on the prospect that you 'might' need the extra money.

Sorry if I have rambled a little, its late and I'm tired, but I just wanted to let you know my opinion of the situation as it drew parallels with my own, only I'm trying to do it the opposite way around.

The challenge is to clear your debt whilst incurring the least amount of interest possible.

thegirlintheattic

Before all this I'd sell the car to clear that debt (I take it you've checked T&Cs and there is no penalty for this?).

Can you do without a car? Have you budgeted for all car related expenses (insurance, MOT, service, repairs, tyres etc.?)

Don't even consider moving out until you've cleared most if not all of your debt. On 14K net you do not need the extra expense.

plum44_2

Taking out a 12k loan on your salary is utter madness. Its going to trap you. How will you have the means to rent your own place soon?

Sorry to be blunt, but the idea of borrowing on a loan in case you might need the money is plain foolish. Dont do it.

The immediate solution is not to borrow 12k- which is a fortune, but to learn to live within your means. Stop borrowing and start cutting back...

somethingcorporate

You want to replace £10k worth of interest free debt with a loan at 10%? Which accountants do you work for? remind me never to use them.

Honestly, your plan is not a good one financially. Sell your car and buy a cheap run-a-round. We bought a 1lt yaris for £1,500 and 4 years and 50,000 miles later it has cost us no more than £400 a year in repairs to keep on the road plus the insurance is pretty cheap.

Tackle your debts in order of which is costing you the most / going to run out the soonest. Explore whether you can transfer to other low interest / interest free options when you need to. I have never seen any benefit in consolidating, least of all to a higher rate. There is no point paying £600 a year in interest just to have a single payment going out of your account, that is sheer madness!

Good luck

plum44_2

It is baffling to constantly hear posters saying they are planning to take out a huge loan because its easier to have a single payment going out of their account....

MuffinTops

If you really feel like you're struggling with your debts being here there and everywhere and want one easy payment, but still take advantage of the 0% deals you have then would it be a possibility for you to open another bank account. Decide on a monthly payment for those debts, move the Direct Debits/Standing Orders to that account and pay one monthly sum into it each month?

You're still getting the benefits you describe of having just the one payment each month, but you're not increasing your debt with interest charges and keeping the 0% figures.

I understand you want a solution today that feels tidy and easier, even if it does cost you a bit, but that just increases the length of time you need to be paying these debts and more money you're giving to others which you work hard to earn. I also get that you're worried you won't get a 0% in 18 months, but that debt won't be the same in 18 months. Also, as and when your income increases you can commit yourself to increasing those payments by a certain percent of your increased income.

If you did anything for increased income in future, like ebaying or selling things on Amazon then you can have these bonus amounts go straight to that account too chipping away at those debts.

It's just an idea that hasn't been mentioned yet, but I have to say that I really don't wish a loan on you with any interest rate. When you look at a loan have a look at the amount each month going on interest and then work out how many hours of work it will take you to pay that off. Looking at debt in that way has really helped me clean up my act.

I hope this helps. I'm by no means telling you what to do, just that I'd like you to see maybe an alternate option that may interest you.

Good luck with it all.

gingeralan

shaun1988 wrote: »

Hi,

I have just applied for a £12,000 loan through Tesco with an advertised headline rate of 6.1% APR.

I have been offered a rate of 9.8% over 5 years (£251 a month.) I am using this to consolidate unsecured university debt (about £7,000 yes bad I know!), pay off a car loan and buy a cheaper car so I can have one payment and know where I stand.

I am 23 years old. Live in the UK. My income is £18,000 a year before tax (about £14,500 after tax) (have had this job for 13 months,) and I have very little expenses (live at home paying £100 a month rent,) however I am looking at moving out and renting soon.

My question is, does this rate seem high, or is it about right considering my income is not particularly high and this is a hefty loan (almost a years take home after tax.) Probably going to try 1 or 2 more companies, but don't want to impact my credit score too much! Anybody in a similar situation as me!?

Your thoughts are much appreciated!!

As a trainee accountant you should not find this too difficult to deal with. if I were you I would use this as a learning opportunity. Pretend you are advising a client as to how to deal with their debt. If you advised them to take a loan at a higher rate than they currently have I would say the client may have a case against you.

Follow the advise on here you won't go far wrong. If you do decide to do this though for goodness sake do not borrow the extra grand as a contingency! why pay the loan company money just so you can have a lump sum just sitting there. You should only borrow for investment purposes, not to fund day to day living expenses.

Just my opinion, good luck with what ever you decide.