Loan Advice

annafloss

Hi all,

I need some advice regarding my current financial situation.. I will try to be as concise and brief as possible!

Firstly, this is the debt I currently have:

* £1650 student overdraft (interest free - need to pay off over the next 3 years)
* £100 on a credit card (I use this credit card often, and pay it off in full every month in order to improve my credit rating - the only reason I have this on here is due to the below situation.)

Also, I have a 'Excellent' credit rating - checked through Experian.

I am a recent graduate, and have secured a graduate job. Although I thought my job would begin straight away, my start date has been allocated for September 17th. I have signed a contract. I will be on £23,500 p/a. The job is in York, and as I'm in Glasgow, I have moving costs and a deposit to fund.

I have a holiday booked for the 1st-15th September, which is paid for - with the exception of spending money. I unfortunately thought that my new job would enable me to save for spending money, but obviously I won't receive a pay in time.

I had a job whilst I was at uni, but this was part-time. I went around the agencies and searched for a temporary full-time position to tide me over, and managed to secure a full-time job in a call centre for £9 p/hr - GREAT! Or so I thought...

The agency - after delaying my start date time and time again - tell me the job has fallen through. I am now searching again, and on Jobseekers Allowance.

I now have a few things to pay for, which I have no money to fund....

* general living costs
* holiday spending money
* deposit/moving costs

I've been doing some research on loans, and have found a couple that suit, although haven't applied yet. Whilst I have always been very good with money, it is still the first very large undertaking I will be committing myself to, so I'm nervous!

The first loan I looked in to was for £3500, over 2 years. This would cover the bare minimum. After doing further research, I discovered is was actually cheaper to borrow £5000 over 2 years. Whilst the payments are £60 per month more, it would be cheaper overall. I feel that this would be a good move, as it would enable me to pay off my overdraft in FULL.

Thus, instead of paying:

£166 p/m to loan
£60 p/m to overdraft

I would immediately eradicate my overdraft, and be paying £226 p/m for the loan.

Of course, this would mean I have more money than I actually need, so considered putting £1000 of the £5000 in savings account, and leaving it there for months when I am perhaps a little short, circumstances change (heaven forbid) or to make a lump sum payment at the end of my term to pay it off early.

So, ultimately, I have two questions:

1. Is this a ridiculous idea? Have I thought this through enough?

2. As I don't start my job until September, but have signed a contract, should I consider myself as 'employed' in the application form?

Please note: I cannot ask family members for financial assistance - I'm in this alone!

I will be earning approx. £1500 after tax p/m, with approx half of this going on outgoings (including the loan payment).

Any advice would be appreciated - I just want to ensure I'm doing the right thing!

Apples2

annafloss wrote: »

1. Is this a ridiculous idea? Have I thought this through enough?

2. As I don't start my job until September, but have signed a contract, should I consider myself as 'employed' in the application form?

1. Yes, No.
2. No

It comes down to bare facts, you have no job and no income (apart from JSA).
You want money to clear debt, pay for a holiday and put in savings which will pay lower amounts to you than you will be paying to keep it there.

You would be considered a very high risk, no matter what kind of "score" the CRA's award you.

It's very unlikely any lender would take this on at all, try your own bank once, and once only. When they reject you, consider prioritising things, is a holiday really the best use of money you don't have?

annafloss

Really? Even though I have a full-time, well paid position gauranteed from September onwards?

My own bank's interest rates are way too high. I was hoping to go to Clydesdale Bank or apply online to Tesco Bank or Derbyshire. Would it make sense to go in to the bank and speak to someone, rather than do it online, in order to explain my situation better?

Moneymash

Think carefully about getting a loan for more than you say you need. Also why would you get an interest bearing loan to pay off an interest free overdraft. The interest you would earn in savings doesn't compare to the interest of the loan, if you can get a loan at all.

You also need to consider that you have yet to start this job, whenever I've started a new job I've been on the wrong tax code, which has left me short until it's been sorted. You have a probabtionary period to get through and you yourself may not like the job, company, colleagues. If you wanted to leave which you could do if you can scrape by covering basic living costs, it would be more difficult if you had debts.

annafloss

Yeah I understand that one! I only considered taking out more than I needed as it worked out cheaper overall. In addition to this, it seemed to make sense to make the process simpler by paying it off in full and making one payment instead of two. It also made available that extra bit of cash in case something did go wrong - it would cover 5 months payments.

In that case, would taking out the bare minimum be more sensible even if it costs slightly more?

I get a £1500 'Golden Hello' in my first months pay also, therefore if my tax code - for instance - was wrong, I would be covered. I'm also not the type to leave a job unless I had another job to go to, so simply not liking the job wouldn't be a worry for me or cause me to pack it in!

I understand there are so many things to consider, I'm trying my best to be as rational as possible...

DCFC79

Just because you have signed a contract for a job starting in september you are still classed as without a job since your not working at the place of employment.

DCFC79

annafloss wrote: »

My own bank's interest rates are way too high. I was hoping to go to Clydesdale Bank or apply online to Tesco Bank or Derbyshire. Would it make sense to go in to the bank and speak to someone, rather than do it online, in order to explain my situation better?

You could try but i dont like the chances.

Moneymash

Why can't you use the 'Golden Hello' to pay off the overdraft, instead of including the entire overdraft repayment in the prospective loan?

CLAPTON

the idea of paying off the 0% overdraft doesn't seem very sensible yet (later that might be a good idea)

the idea of getting the larger loan for the lower APR is a good one as there is nothing to stop you make a large overpayment on the loan after a month or so.

however, you are not actually employed and therefore are very very unlikely to get a loan

annafloss

Hmmm, this is working out quite how I had planned!

Thanks for the advice everyone. Much appreciated.

poppasmurf_bewdley

annafloss wrote: »

Really? Even though I have a full-time, well paid position gauranteed from September onwards?

No one has a GUARANTEED position from September onwards, as millions who have lost jobs or been made redundant from positions they thought were secure for life have found out to their costs (me included).

What happens to you if your new employer goes into administration between now and September? Or they just decide to rearrange the department you're supposed to be in and decide you're not needed? All these things can and do happen. You'll be up the creek without the proverbial paddle. What Apples2 says to you is correct. Listen to him.