Should we accept this?

vernell

Tixy wrote: »

What are the interest rates on each of your current debts? How does that compare to the 12.9% on the new loan?

Are you unable to afford the current repayments amount of £460? do you find you are having to reuse credit each month? are you falling further in to debt.

Snowballing is repaying your debts in the best way to minimise interest, it does require you to be able to afford more than the minimum payments on your debts though. There is a calculator here http://www.whatsthecost.com/snowball.aspx

Is your current mortgage deal fixed? if so when does it end?

Hi


Our current loan has an interest rate of 9.9% and our credit card (except for the £1600 which is interest free until 28/2/15) Im not sure of but I pay £43 a month in interest on a balance of £2980 (I haven't included the £1600 interest free here).


We are not getting further into debt and are managing at the moment but my husband hates living in his overdraft and the credit cards never seem to go down by much as the interest seems huge.


As for our mortgage, it isn't fixed as our Fixed rate ended a year ago but we haven't been in a position to go applying for anything better as we feel with the credit cards, loan and overdraft we would be laughed at!

AndyT678

vernell wrote: »

Our current loan has an interest rate of 9.9%

Difficult to justify taking new debt at 12.9% to refinance existing debt at 9.9% unless you REALLY need to extend the term.

bsms1147

To a lender you will have £32,000 debt on a combined household income of £35,500. Those numbers don't look good, and you might find it difficult to get a better rate than 12.9%. That represent's a lender's estimation of your risk to them.

Reducing the monthly payment may also look attractive, but you will be paying more in the long run. Is that what you want?

Tixy

Is the new loan you have been offered with the same bank as the existing loan?

I'd have a go at completing a snowball calculator (you need to find out the APR of the card to do this) and work out how long it will take to clear the existing debts and how much interest you will pay if you just stick to the existing debts and paying what you can afford to them.

Cash_Flow

bsms1147 wrote: »

To a lender you will have £32,000 debt on a combined household income of £35,500. Those numbers don't look good, and you might find it difficult to get a better rate than 12.9%. That represent's a lender's estimation of your risk to them.

Reducing the monthly payment may also look attractive, but you will be paying more in the long run. Is that what you want?

Where do you get the figure of £32000 from?

Cyberman60

thebritishbloke wrote: »

Do you really not realise how easy it is for a company to mass-print letters with different names and addresses on them?

Maybe just a little as I was a computer contractor etc for nearly 30 years :rotfl: The fact is that the rate was offered and I had a certain period in which to take it up. Of course it was not secured BUT these companies making these offers have some idea of the assets backing people like myself if the worst happens. 12.6% APR is still high IMO in the current climate. :eek:

vernell

Well, I have just found out my credit card is on a rate of 16.6% (£2129) and 20.6% (£1057) and the entire balance of my husbands is 20.6% and the interest rate on the overdraft is 19.9% so I'm thinking of accepting this loan at 12.9% and paying everything off as I've conducted the snowball calculations and it seems that we will only pay an extra £300 in interest and we may well save that if we manage to get a cheaper mortgage deal sooner if we only have the one debt rather than 4. It will take 12 months longer to pay off but we can make overpayments which we could do as we would be saving £100 a month and this way, we may not take that much longer to pay anyway.


I obtained a few other quotes and the best was 16.6% so 12.9% doesn't look that bad after all.


Thank you very much to everyone who replied and helped me make an informed decision!!


Regards


K

JimmyTheWig

Cash_Flow wrote: »

Where do you get the figure of £32000 from?

They are £16k in debt currently, and looking to take out a loan for £16k.
We know that they are going to use the loan to pay the other debt, but the bank can't be sure of that.

Gaz83

Cash_Flow wrote: »

Where do you get the figure of £32000 from?

Because lenders won't trust that everyone they lend £16,000 to to consolidate debts will actually use it to consolidate debts. A sizeable number of them will buy something shiny and end up with £32,000 debts. Hence they will err on the side of caution.

Cash_Flow

JimmyTheWig wrote: »

They are £16k in debt currently, and looking to take out a loan for £16k.
We know that they are going to use the loan to pay the other debt, but the bank can't be sure of that.

So by your logic then the bank has also decided to lend them close to 90% of their combined salary via a unsecured loan which would go against responsible lending.

Also the OP mentioned that the bank would be canceling one of the overdraft facilities, and reducing the other so they are in this case "sure" of where some of the money is going.