Loan advice

mcowan77

Hi looking for some advice plz

Currently have a unsecured loan.. Balance outstanding of 11500
With 47 payments left... 5.1 %....£283 per month

My only other debt is my mortgage... Balance 103000 with 27yrs 6 months left.. 3.49% fixed until JAN 16.. £470 per month

I applied for some additional borrowing and was accepted for 13000 5.1 % fixed until JAN 18. £73 per month..This is the same term as my mortgage.

Im thinking of taking the additional borrowing, pay off the unsecured loan..

I need the 1.5k left over for some urgent home repairs.

From next month i will then be in a position to overpay my mortgage by £400 per month.


Would this be sensible?

Thanks

[Deleted User]

£73pm, for 42 months, is only £3,066 :huh:

mcowan77

The term is the same as my mortgage.. 27yrs 6 months

[Deleted User]

I see.

Well, that would amount to £24,090, over the life of the loan, compared to just £13,301 left to pay on the existing loan.

That's close to an extra £11k. :eek:

Plus, do you really want to be paying a personal loan, for the next 330 months?

mcowan77

Hence why i will overpay 400 per month on my mortgage.. Them combine both loans when the fixed term ends?

[Deleted User]

Even with overpayments, you will still be paying for a long time.

If I were you, I'd overpay whatever I could on the existing loan, and get it cleared ASAP.

Once it has been cleared, you will have an extra £283 per month in your pocket/account, which you could use to overpay the mortgage, or put toward something else, eg. a holiday, new car, etc.

bargainbetty

If you need money for home repairs, you might be better off seeking a small credit card with a purchases deal for now, and using all spare funds to pay that off.

You are adding a fortune in interest to your debts, and overpayments don't always happen as we plan... life gets in the way.

Tixy

Does your mortgage allow overpayments of 85% of your current repayments?

If it did then in theory moving the debt to a cheaper APR and repaying at a quicker rate would mean you would pay less in interest overall.
However you would not get the whole secured loan paid off before the end of your current fixed deal, and so could end up paying a significantly higher APR after Jan 18 on the secured loan.
And with the extra loan being secured you will then have a higher LTV than if you keep it unsecured which again means you may not get such a favourably mortgage rate.

Plus by converting unsecured debt to secured you are potentially putting your house at greater risk if you should have a change in circumstances financially.

I wouldn't do it. But if you could afford £400 a month to the debt then I would consider overpaying your current loan to clear it quicker (check the T&Cs for any fees for overpayments just in case).

As bargainbetty suggest I would consider a 0% credit card for the home repairs, then once those are repaid would overpay the loan until paid off. Once that is paid I would then start overpaying the mortgage if possible.

mcowan77

Thanks for the advice.. Ill think it over!