Consolidation loan - better off using it to pay all debt off or monthly?

m33r4

Ok here is the scenario:

I had a balance of appx £850 owing on my Virgin Mastercard
I had a balance of appx £1250 owing on my HSBC Mastercard
I had a balance of appx £400 owing on my Argos storecard

Because of late payment when my bank was faffing to instill a DD payment in place, I missed a payment on the Virgin Mastercard so the 0% interest facility was removed as a penalty. Because I was too busy running my household and didn't check my emails from Virgin, they had charged me a lot of interest over the months after the DD was missed.

As Barclays Platinum was offering me a 0% interest up to September 2013 for balance transfers, I moved the Virgin Mastercard balance onto my Platinum.

I paid off appx £100 on my Argos storecard and the remainder £300 is on 0% interest for 9 months (up to June 2013).

Within a few days of sorting out the balance transfer and paying off some of the Argos storecard, I was approved for a consolidation loan from HSBC payable over 24 months at 18.9% APR for £3,500. I am expected to pay £174 monthly for the next 24 months until this loan is paid off in October 2014.

I had applied for this loan intending to pay off::cool:

The Virgin Mastercard balance
The HSBC Mastercard balance
The Argos storecard
Plus other stuff like school bus (£400 for the year), road tax (coming up in Oct 2012), school uniform (£250), xmas 2012 expense coming up without having to use my credit card

As I wasn't sure if the loan application would be approved, and as I didn't want Virgin and to keep charging me interest, as the loan was being processed, I moved the Virgin balance onto my Barclays 0% interest till September 2013 Platinum card. I also paid off some of the balance on the Argos storecard leaving about £400 owing on the card at 0% for 9 months.

However now that the loan of £3,500 has been paid into my account, I have paid off:
£1250 HSBC Mastercard debt :T
£ 400 school bus:T

Balance of £1850 left in my account which I have transferred into my HSBC BNS account online

I am now thinking whether I should just pay off the Argos Storecard of appx £400 and the Platinum of appx £867 or should I set up a Standing Order that pays the 0% interest rate amount until the balances are paid off? Will I benefit at all from doing that or would that just be holding off the inevitable of having to pay it all off now or before their 0% interest rate offer period expires?

Would the BNS saving account for instance earn me enough interest on £1850 in the meantime to make it worthwhile even if I occasionally move/transfer money out of it etc?

Often I think of just paying it all off and getting on with feeling non committed to these cards. At other times I think well I have 0% interest free for a while anyway so why not just pay smaller sums monthly and let the loan balance sit in my BNS in the meantime for unexpected expenses in the meantime and so I don't have to run to my credit cards again.

Any input/advice/help/guidance please?

Thanks:)

CLAPTON

you started with debts of 2,500 and you now have a debt of 3,500

I assume that the school bus, uniform, car tax and christmas will come again next year; what provision are you making to save up and pay these next year?

It's not clear whether your total debt is increasing, decreasing or staying the same

if you are well disciplined it obviously makes sense to pay the least interest on your debts and earn the most interest on your 'savings'.

expect for the loan at 18.9% are any of the other debts charging any interest?
what interest are you earning on the BNS (assuming that is a savings account)?

sharpy2010

I think you'd be better off just paying the whole lot now. If you keep the balance in your account, you'll probably whittle it away (Oh, I need some food, a train ticket, trip to the theature etc), and the pennies you'll earn in interest by keeping the money in the bank just isn't worth the risk.

m33r4

CLAPTON wrote: »

you started with debts of 2,500 and you now have a debt of 3,500

I assume that the school bus, uniform, car tax and christmas will come again next year; what provision are you making to save up and pay these next year?

It's not clear whether your total debt is increasing, decreasing or staying the same

if you are well disciplined it obviously makes sense to pay the least interest on your debts and earn the most interest on your 'savings'.

expect for the loan at 18.9% are any of the other debts charging any interest?
what interest are you earning on the BNS (assuming that is a savings account)?

I am looking for a full time post so my earnings go up high enough to pay the bus and other family expenses next year without using my credit cards.

No, I have no other debts charging interest.

The BNS interest calculations are too confusing for me - any help would be much appreciated hence the post:
https://www.hsbc.co.uk/1/3/!ut/p/c5/04_SB8K8xLLM9MSSzPy8xBz9CP0os3gDd-NQv1BDg2AXA1-PEE9zN8NAAwgAykeaxTu7O3qYmPsA-WGergaeJk4mBqa-boYGnsYEdBfkhioCAGluAyE!/

CLAPTON

the HSBC online bonus saver pays absolute rubbish 0.25% AER so if you saved a 1,000 for a year you would earn £2.50

why not open something like Northern Rock (Virgin) that pays 2.6% which give you £26 .. not a fortunate but would pay for a take away
(there are better a/cs but that's just one that comes to mind and can be opened easily online)
however your most cost effective way of saving money is to make additional payments on the loan as that's costing you 18.9%.
However, only make overpayments to the loan if you are sure you can pay the CC in full before the interest starts and that you can continue to make the loan repayments on time.

heartbreak_star

Pay it all. And cut up your cards.

HBS x

Sam_Briton

Any one waiting for a mortgage approved from Lloyids TSB?The process is so tiring.Any one know any other Banks offering it with bit more easy process?

m33r4

CLAPTON wrote: »

......
However, only make overpayments to the loan if you are sure you can pay the CC in full before the interest starts and that you can continue to make the loan repayments on time.

Not sure if HSBC has already worked out the interest already for the whole 24 months and added that on as they told me over the 24 months I will be paying a sum of about £4,100 on the £3,500 loan I took.

somethingcorporate

Replacing 0% debt with 18.9% debt is sheer lunacy. Pay the money back to the loan and reduce this outstanding amount on this rather than clearing your 0% debts.

m33r4

somethingcorporate wrote: »

Replacing 0% debt with 18.9% debt is sheer lunacy. Pay the money back to the loan and reduce this outstanding amount on this rather than clearing your 0% debts.

Please read original post of why consolidation loan was taken. Was not to pay off 0% debts but credit cards, storecard, outstanding debts.

somethingcorporate

I did read it, you asked whether you should use the balance of the loan to pay off your platinum which is you 0% debt. This is stupid, you should use what is outstanding to pay down your loan debt @ 18.9% APR.