My scenario - What do you think?

PaulAFC

Hi all

I am sure I am in the right place for some advice s over to you experts please

My scenario is below:

• Requirements - Home improvement costs for approx. £5k
• Mortgage - No equity available as mortgage already at 5 times income
• Credit Card (HSBC) - £2,800 (current credit limit)
• Savings (HSBC) - £2,500

Here is what I am thinking of doing is the following:

• Keep savings as a safety net
• Aim for one new credit card with a limit of £8k which has a 0% balance transfer and 0% new purchases for as long as possible. I do not think my credit rating will be good enough for two cards. Will it be good for one new card!?

I am happy to listen to all solid ideas and have looked at things like new bank accounts and personal loans. I have had the same bank account and credit card since uni which is now unfortunately 17 years ago!

Thanks so much in advance
Paul

Maestro.

8k is quite a substantial limit. You probably won't get it unless you are a high earner as you already have quite a bit of debt. No harm in trying though.

You-kip

8k limit will be a toughy to get maybe MBNA or BC could be your best bet but think you'll struggle IMO to get the full 8000

marathonic

I'd save up for it.... you've already saved 50% of the required money.

If you think it'll take too long to save another £2,500, I'd argue that you can't afford to be taking on any more debt.

PaulAFC

marathonic wrote: »

I'd save up for it.... you've already saved 50% of the required money.

If you think it'll take too long to save another £2,500, I'd argue that you can't afford to be taking on any more debt.

Thanks for this.

So do you think I should get a 0% balance transfer card for my current credit card?

marathonic

PaulAFC wrote: »

Thanks for this.

So do you think I should get a 0% balance transfer card for my current credit card?

Yes, that would be a reasonably good idea. Go for the longest balance transfer deal you can get and don't worry about interest free purchases.

Then you'll not be getting into further debt and have a long time to save for the home improvements.

grumbler

marathonic wrote: »

If you think it'll take too long to save another £2,500, I'd argue that you can't afford to be taking on any more debt.

Exactly.....

traveller_on_a_budget

If I were in your shoes, I would use the savings to to almost clear the credit card debt. This will save you a lot of money in interest and will help your credit score in the future, as being maxed out on available credit works against you. This will also greatly improve your monthly available cash to spend.

Then, after two or three weeks, make an appointment to go and see your bank to get a loan. The person you will see at the bank will, almost certainly, be on commision and will want to offer you the money. Remember to ask them to do a "soft" search to establish weather you are likely to be accepted, before going ahead with a "hard" search (too many of these in a short time will have an adverse affect on your credit file)

The better your rating, the better rates the bank will be able to offer you. So its well worth tidying up any debts before applying.

PaulAFC

traveller_on_a_budget wrote: »

If I were in your shoes, I would use the savings to to almost clear the credit card debt. This will save you a lot of money in interest and will help your credit score in the future, as being maxed out on available credit works against you. This will also greatly improve your monthly available cash to spend.

Then, after two or three weeks, make an appointment to go and see your bank to get a loan. The person you will see at the bank will, almost certainly, be on commision and will want to offer you the money. Remember to ask them to do a "soft" search to establish weather you are likely to be accepted, before going ahead with a "hard" search (too many of these in a short time will have an adverse affect on your credit file)

The better your rating, the better rates the bank will be able to offer you. So its well worth tidying up any debts before applying.

But wouldn't the loan cost more as a new credit card can have 0% interest for a couple of years?

ermine

Are these home improvements wants, or are they needs? Do they secure the fabric of the house against further deterioration (eg fixing leaks etc) in which case they're Needs, or are we talking a new kitchen here, in which case we are talking Wants?

I ask because these

Mortgage - No equity available as mortgage already at 5 times income
Credit Card (HSBC) - £2,800 (current credit limit)

are flashing warning signals of an overleveraged household. Even if you borrow the money interest free it's still costing you the interest on the HSBC maxed card, because you could otherwise pay the debt off with the money you are trying to raise to spend more.


You shouldn't pay interest on buying Wants, because otherwise you are choosing to pay more for your wants, and that ultimately means you get less for your money. You wouldn't buy your home improvements from a store that says 20% extra on all prices today, but that's what you're doing if you buy them with debt on which you will pay interest.

PaulAFC

ermine wrote: »

Are these home improvements wants, or are they needs? Do they secure the fabric of the house against further deterioration (eg fixing leaks etc) in which case they're Needs, or are we talking a new kitchen here, in which case we are talking Wants?

I ask because these

are flashing warning signals of an overleveraged household. Even if you borrow the money interest free it's still costing you the interest on the HSBC maxed card, because you could otherwise pay the debt off with the money you are trying to raise to spend more.


You shouldn't pay interest on buying Wants, because otherwise you are choosing to pay more for your wants, and that ultimately means you get less for your money. You wouldn't buy your home improvements from a store that says 20% extra on all prices today, but that's what you're doing if you buy them with debt on which you will pay interest.

This is a great way of looking at things thanks as ultimately they are wants.
Cheers