Applying for a loan to help save

JManDevo

Hi Guys,

I was thinking about your thoughts one applying for a loan for a few reasons.

I'm awful at saving money and budgeting, I had a 2k credit card bill last year that I had that for about 2 years, 2 years on and I still had that 2k bill, never missed a payment but I paid the minimum amount off.

Last year I decided to get a 2k loan from my bank, fixed term, 12month pay back. I managed to pay it all off as soon as I got the loan, and paid the money off .. no more debt on that credit card after 12 months!

I have only 2k left that I have to pay off, so I was thinking about your thoughts on getting a 5 year 10k loan, this will help pay off the 2k, and put the rest in the savings account. This is at a 4.8% apr, after the 5 years I will be paying back an extra 1k (that's if they dont increase the apr rate when querying my claim).

Now I know this is dangerous, I have 8k there and it is a possible avenue of 'oh il treat myself, il dip into it' yada yada yada, but because I'm saving up for a deposit I believe despite the 1k interest im paying over 5 years, this is a viable way to help me rid my 2k loan AND save for that all important mortgage.

What does everyone think about using a loan for these reasons?

Regards,
Joe.

Pixie5740

I don't think you should get a loan. You just need to learn how to budget and save, especially if you plan on becoming a home owner one day. There can be a lot of unexpected expenses with owning your own home. How would you pay for things like a new washing machine or roof repairs if you have no savings?

Sedge123

Are you serious?? Why take out more debt? Just save up!!

Cycrow

its never a good idea to use credit for savings (except in the case of 0% credit)
as you will pay more for the credit than you will get from savings.

the better option would be to setup a standing order and move the amount you would have paid per month on the loan into a savings account

[Deleted User]

Absolutely nuts. You can't borrow savings. You need to save them.

Clive_Woody

Possibly consider getting a loan to clear credit cards and repay this as fast as possible, but getting a loan to put into a savings account makes no sense.

Even if you got the typical rate (only offered to 51% of successful applicants) you would only be getting minimal interest in a savings account and therefore this would cost you more than you would ever gain in interest.

Seriously don't do it.

Tixy

If you want savings then save them.

If you set up a regular saver with a DD/standing order to go out at the beginning of each pay cycle there is no reason why you should find that any harder than repaying a loan via DD each month.

somethingcorporate

Totally bonkers idea.

Just pay the equivalent of the loan repayment onto your outstanding credit card debt (rather than just pay the minimum) and then save this amount when the debt is cleared. This way the savings will be yours and you won't have wasted another £1k in pointless interest charges.

If you cannot afford to make additional payments onto the card at present how do you think you'll be able to afford to pay back the loan, which will almost certainly have a higher payment than the minimum on the credit card.

Ilona

Bonkers idea. Savings are bits of money you have left after your bills have been paid.
Ilona

DCFC79

JManDevo wrote: »

Hi Guys,

I was thinking about your thoughts one applying for a loan for a few reasons.

I'm awful at saving money and budgeting, I had a 2k credit card bill last year that I had that for about 2 years, 2 years on and I still had that 2k bill, never missed a payment but I paid the minimum amount off.

Last year I decided to get a 2k loan from my bank, fixed term, 12month pay back. I managed to pay it all off as soon as I got the loan, and paid the money off .. no more debt on that credit card after 12 months!

I have only 2k left that I have to pay off, so I was thinking about your thoughts on getting a 5 year 10k loan, this will help pay off the 2k, and put the rest in the savings account. This is at a 4.8% apr, after the 5 years I will be paying back an extra 1k (that's if they dont increase the apr rate when querying my claim).

Now I know this is dangerous, I have 8k there and it is a possible avenue of 'oh il treat myself, il dip into it' yada yada yada, but because I'm saving up for a deposit I believe despite the 1k interest im paying over 5 years, this is a viable way to help me rid my 2k loan AND save for that all important mortgage.

What does everyone think about using a loan for these reasons?

Regards,
Joe.

Well theres no time like the present to start learning about saving and budgeting, you will have to learn how to do when you get the mortgage. Getting a loan in this instance is just papering over the cracks, its easily fixable.

opinions4u

Borrow £10k at 5% = £500 a year in interest spent (assuming no debt reduction)
Save £10k at 2% = £200 a year in interest earned.

So you effectively want to spend £300 a year to achieve absolutely nothing.

Stop borrowing. Repay your debts. Then start saving.