Advice: Should I increase the length of personal loan to free up cash?

Johnny_Chaos

Hi. Just wondered if someone can offer some cold-headed sensible advice.

About 3 and a half years ago I took out a large (25K) loan to consolidate debts. This was over 7 years at around £400 a month. Obviously I'm now half-way through my repayments and in another 3 and a half years it'll be gone.

The issue is, owing to a pay cut earlier this year the £400 a month is a bigger chunk than it once was. I can pay it, but it's a struggle and not much left over to enjoy life.

I have the option to take out another loan, which will be remaining balance over another 7 years, which will take my repayments down to £230 a month, which is much more manageable. If my pay increases in future, I could always make overpayments.

Would this be a wise move?

I don't have other debts, apart from my mortgage. Car now paid off. :j

What do you reckon?

JasX

Generally no, you need to focus on the total amount of interest you are paying under both arrangements... *this* is the amount of money you will not have to enjoy spending on life/stuff over the next 3-7 years and in 7 years time will be a measure of the amount of 'fun/stuff' you missed out on.

It's why paying interest is generally worth avoiding wherever you can and the effects of paying more for something in interest so you can have it *now* rather than waiting a few months/year or so for it are so so damaging.

I strongly suspect you'll find if you knuckle down you'll be able to have a great time with the full £400 (plus pay rises) in 3 years time.... OR be able to focus on some other financial goal like a deposit for a bigger house, planned and saved for big holiday etc... If you take on more debt now (in higher interest payments) to stretch this all out over 7 years it'll be an ongoing and bigger 'not fun' burden

Johnny_Chaos

JasX wrote: »

Generally no, you need to focus on the total amount of interest you are paying under both arrangements... *this* is the amount of money you will not have to enjoy spending on life/stuff over the next 3-7 years and in 7 years time will be a measure of the amount of 'fun/stuff' you missed out on.

It's why paying interest is generally worth avoiding wherever you can and the effects of paying more for something in interest so you can have it *now* rather than waiting a few months/year or so for it are so so damaging.

I strongly suspect you'll find if you knuckle down you'll be able to have a great time with the full £400 (plus pay rises) in 3 years time.... OR be able to focus on some other financial goal like a deposit for a bigger house, planned and saved for big holiday etc... If you take on more debt now (in higher interest payments) to stretch this all out over 7 years it'll be an ongoing and bigger 'not fun' burden

Thanks. That's given me plenty to think about and - I think - has helped me make my decision. The easy option was to refinance; the sensible option was to plough on as it is and get it paid off ASAP.