Debt Consolidation

Baby2014

Hi can anyone help me as I'm trying to cut my 3 year loan to 2 years via debt consolidation.
So... My current loan has a balance remaining of; £5,343.00. It has an APR of 14.6% and 3 years remaining with monthly repayments of £186.15.
The new loan I am looking at is £5500 it has an APR of 5.7% but the monthly repayments are more at £242.67.

This sounds better just by reading it but with the monthly repayments being more is it actually going to save me any money!?

I would really appreciate any comments as I'm not 100% sure how to get an exact figure of savings or loss.

Kind Regards,

PeacefulWaters

186 x 36 =

243 x 24 =

Do the sums and then decide!

bigadaj

Yes it will save you interest because your paying back more quickly so less time for interest to accrue.

A quick and easy approximation is that if you pay back in two years then the equivalent for the three year loan will be 50% more in terms of your actual monthly payment. So the three year loan I earn two years actually becomes around £290 per month. So you'd be saving around £50 per month on a Like for like basis.

However the loan your looking at probably has a headline rate of 5.7%, there's no guarantee that is what they will offer you, it could be far closer to what you are now paying or you may get a decline.

Another problem is that the new lender will see your current loan and assume the new loan is is in addition to the old loan, so borrowing £11000, so you'd need to earn over £22000 to have a good chance of acceptance.

19lottie82

First off, what's your salary? You'd need to be earning circa £22k + to be accepted, as a rule of thumb. Thats assuming you have no negative marks on your credit history (defaults, or late payments), and no other debt apart from your existing loan.

Also, have you actually been offered this rate? It seems pretty low for a 5.5k loan........ Even if thats the rate being advertised, it doesn't mean you'll get it, its for the top 51% of applicants that they accept.

ViolaLass

Are you allowed to make overpayments on your current loan? That might be the cheaper way of paying it off sooner - saves you applying for another loan, taking the risk of a less good interest rate, means you can start now etc.

Gaz83

Assuming you have exactly three years left on your first (36 payments) and not, say, two years and 10 months, or three years and three months, then your first loan will cost you £6,701.40 to service.

This new one you're looking at will cost £5,824.08, assuming you're accepted and given this rate. That's a saving of £877.32.

Have you considered finding out if you can overpay your current loan by £56.52 per month?

dresdendave

In most situations taking on new debt to reduce existing debt rarely goes to plan. Far better to look at ways of reducing your outgoings to increase your disposable income and then (depending on the T&C's) either look at increasing your monthly repayments or build up a lump sum over a few months and pay that towards reducing the balance.

DFW board is great place for money saving tips.

CLAPTON

Baby2014 wrote: »

Hi can anyone help me as I'm trying to cut my 3 year loan to 2 years via debt consolidation.
So... My current loan has a balance remaining of; £5,343.00. It has an APR of 14.6% and 3 years remaining with monthly repayments of £186.15.
The new loan I am looking at is £5500 it has an APR of 5.7% but the monthly repayments are more at £242.67.

This sounds better just by reading it but with the monthly repayments being more is it actually going to save me any money!?

I would really appreciate any comments as I'm not 100% sure how to get an exact figure of savings or loss.

Kind Regards,

of course it will save you money; you will be paying a lower APR and over a shorter period

as long as you can afford the 242 pm of course.