Calculation Required Egg CC -v- Asda loan

eggandspoonbutnorace

Hi there

I need a little help with some calculations

My egg CC statement states:

Interest rate charged 21.9% pa variable for purchases <-- I never use it …it was for a balance transfer only.

MERCHANDISE INTEREST AT 1.667 PER MONTH <-- As above balance transfer

My minimum payment is about £200 yet the interest I am being charged is about £175 per month, its only going down about £30 per month and I cant really afford to increase the min payment.

Would I be better off (APR wise) getting an ASDA loan at 5.9% …basically would the interest be less each month and more gets paid off?

Sorry if this does not make sense.

Thanks

TIMTIMTOM

eggandspoonbutnorace wrote: »

Hi there

I need a little help with some calculations

My egg CC statement states:

Interest rate charged 21.9% pa variable for purchases <-- I never use it …it was for a balance transfer only.

MERCHANDISE INTEREST AT 1.667 PER MONTH <-- As above balance transfer

My minimum payment is about £200 yet the interest I am being charged is about £175 per month, its only going down about £30 per month and I cant really afford to increase the min payment.

Would I be better off (APR wise) getting an ASDA loan at 5.9% …basically would the interest be less each month and more gets paid off?

Sorry if this does not make sense.

Thanks

Hi,

I'd say with the loan, you've got to be careful of any early redemption charges. What rate are you on for your Balance Transfer? It normally works out better taking a loan, but again, there are sometimes hidden clauses that tie you into the loan until the mature date of the loan.

peterbaker

You don't say how much you have borrowed, but as your minimum payment is £200 per month I am guessing that is perhaps 2% of what you borrowed. I.e. that you borrowed £10K

If that is the case then your balance transfer interest appears to be at a non-promotional rate i.e. about the same as purchase interest?

Are you also paying for Payment Protection Insurance at some horrendous rate too?

If I have guessed right, and it you are creditworthy enough to get the 5.9% loan tomorrow, I would say it is a no brainer. A straight 5.9% APR loan with no arrangement fees equates to less than 0.5% per month interest, which could be less than a third of what you are paying Egg in interest.

...on your scientific calculator - or use Windows Calculator in Scientific View:
(1 + (5.9/100)) ^ (1/12) where 5.9 is the APR% and the 1/12 is for one month not twelve, and ^ is the 'x to the power of y' function button on the calculator .... you should get something like 1.0047885....

Subtract 1 from the answer and then multiply what's left by 100 to get a monthly percentage answer = just under 0.5%....remember to use ALL the brackets in the first part or you will not get the right answer! ....

If I have guessed right so far then I think you might be losing over £100 a month in the wrong deal in interest alone.

Another test of what interest rate Egg have applied to your balance transfer is to look to see if you were charged a handling fee for doing it? If you paid no fee then you WILL be paying 1.667% per month just like purchases. Egg strangely only charge a handling fee when they apply a promotional balance transfer interest rate!

I am guessing that you may have borrowed slightly more than £10K and your actual minimum payment is slightly more than £200 per month too?? If you provide us with all the numbers we can crunch them better for you. You havent mentioned any insurance charge or Card Protection charge so I am guessing that you have luckily escaped that one as it alone would be costing you around £80 per month I think!

HEALTH WARNING: Remember I have made big assumptions from the limited information you gave, so I apologise if I guessed wrong!

TIMTIMTOM

peterbaker wrote: »

Are you also paying for Payment Protection Insurance at some horrendous rate too?

Also remember that, if your a minimum payer, and you have Repayment Protection, then your balance can actually INCREASE rather than decrease, as any payments made towards the card come off interest first, then, and premium on the account(insurance).

eggandspoonbutnorace

Peter

Thank you very much for your excellent reply and believe me I do appreciate it.

I initially transferred about £12K from a credit card to Egg but this was about 3-4yrs ago and have never used the card at all. (I don’t even have it now. I merely pay off the min payment etc, each month.

My balance is currently £10,067 and my min monthly payment is £205.
I don’t think I’m paying the payment protection premium. Certainly no insurance premiums etc.

I take it that I might be better off applying for the Asda loan?

peterbaker

Hi E&SBNR!

Glad it was of some assistance to you!

I am no expert so I can't advise you on what deals are out there. I am just a punter who had a good maths teacher once:-)

If you can get the ASDA loan at 5.9% (I guess it depends on your personal credit rating whether you get offered that low rate or not), then their online loan calculator at https://www.gemoney.co.uk/apply/asdaloans/calculator.jsp?route=0000&banner=asd&product=L132L134&viaCalc=Y
says if you borrow £10,100 over 5 years, you can expect to pay £194.08 per month. At the end of the five years, assuming it is a fixed rate deal (and I don't know if it is or not) then you will have paid it all off.

I you want to buy payment protection insurance from them for sickness and unemployment, their rates look ok (they appear to be less than half what you would pay on a credit card), but that obviously means you would take longer to pay off your loan if £200 per month is your maximum budget. Instead of 5 years it would take you 7 years to pay it all off with their best insurance package.

I doubt you have insurance at the moment or you would have noticed it! With Egg, payment protection insurance alone woud be costing you around £80 per month ON TOP of the £175 interest!

I don't know what others think, but if you have a stable credit record and income, it might be worth applying online and seeing what rate they offer you.