Is this a stupid idea?

mr_eggs

(figures are rough as not at home)

Santander loan originally 25k taken out about 6k left on it

Halifax credit card £8k left on it - £147 a month payment

Barclaycard credit card 3k left on it. - £41 a month payment

My wife rang Santander and they said if needed we can borrow up to the amount of 20k so minus 6k left that would give us 14k

The plan is to kill the two credit cards off, so in effect we would borrow an additional £11k which would take loan back up to 17k, they said if we did this the monthly Santander loan payment would go from £341 to £390.

Is this a good idea?

Learning2Budget

Consolidation of debt is rarely a good idea! Voice of experience here. If you are going to do something like that you need to look at why your Debts are what they are. Do you spend on the cc each month as an over spend or to simply live. Or are you in the process of shutting them down never to use again.
I would keep a spending diary for a month to see what yourmoneygoes on. Post a SOA on here and then look at why you have got this much debt.
I know the above is nothing ti do with what you have asked but you don't want to consolidate and then run up cards again.

Someone older n wiser than me will come along soon. Good luck. L2B.x

OneLife_OneShot

Depends on whether the new loan would save you money on any interest paying on the cards.

LadyV2508

A loan to pay off the cards can be a good thing if you are getting into the habit of paying money off your cards each month and then spending on them, or just paying the minimum payment etc.

If you do decide to get the loan, pay off the credit cards immediately, cut them up and close the accounts! Its all too easy to rack the debts up again (Ive been there!).

Good luck to you x

mr_eggs

Hi,

Thanks for you reply, we have not spent on credit cards in 5 years, we have played the 0% game and got it down from 6 cards to these 2.

We are surviving quite well and are paying everything each month (albeit minimum payment), my wifes idea was to save us even more money buy getting shot of the cards and having a bit extra each month. The loan is coming to an end august 2014 and the thought of extending it for another 5 years doesn’t bond well.

I know that’s a false economy as we should be paying more than minimum payment at the moment.

cheers

Tixy

Are the cards on 0% deals at the moment? if not what APRs are they?

If you are managing paying £529 a month then your debts will be paid off sooner by continuing to pay that amount not by reducing is to £390.

Ideally look to increase the payments to the cc just by a small amount each month - instead of £188 would £200 be doable.

Even if you cannot afford more than the minimum payment of £188 the key is to make sure you keep paying £188 not paying less as the minimum payments slowly go down.
Maybe try putting your debts/APRs etc in to the snowball calculator to see how quickly you will become debt free - hopefully that will be sooner than 5years if you take out the loan.
http://www.whatsthecost.com/snowball.aspx

[Deleted User]

mr_eggs wrote: »

we have played the 0% game and got it down from 6 cards to these 2.

Are these 2 cards 0% and, if so, when will that end, and what will the APR be then?

Firewalker

This is a smart idea only if:

1) you make sure that your loan allows early repayment without penalty;
2) you are very certain that you have the discipline to use the money you are releasing monthly (by consolidating) to overpay the loan - and then some; and
3) last bot not least from now on you pay off your CCs in full every month (not using them can affect you credit score so use them but like the useful financial isntrument they are)

If you think you may fail on one of the three points above - don't do it!

Firewalker

mr_eggs

hi thanks for all the posts... just got more info from the wife..

Halifax credit card £8k left on it - £147 a month payment (6.6%apr for the life of the card)

Barclaycard credit card 3k left on it. - £41 a month payment (0% up next month)

Santander is 6.5%apr

cheers

[Deleted User]

What would the APR be on the loan?

Verbatim

What's the APR of the loan you would take out? And are there any early repayment charges? Will you be able to get another 0% deal or low life of balance when your current deal runs out? If the apr on the loan is higher than the aprs you're paying on the cards it will cost you more and take longer to repay. Also if the life of the loan is longer than the time you'd repay the cards work out what you'd pay in full in both scenarios.
Sounds like you'd rather stick with the cards anyway?