Amigo Loan vs Credit Card

thecourtjester_101

Hi,

Wonder if anyone can offer advice/been in a similar situation.

I'm trying to rebuild my credit after having it destroyed by my ex (my own fault for letting him do it, I completely get that).

I have been successful in paying off a fair number of creditors, and getting everything in the green for over a year now, so my score gradually increasing. Only thing I have left now, all still in green, are two credit cards (one of £450 limit and one of £1000 limit)m and a £5000 Amigo Loan, paying back £197/mth.

I have been paying the loan for over a year now, and it's only actually taken £20 of the actual capital, so all I'm doing each month is effectively paying off the interest.

Would it be more beneficial to clear off the credit cards each month, then 'pay' off the loan using the cleared credit cards (therefore maxing them out that month), but then repeat the process each month until the loan is cleared? They are both Capital One cards so the interest is not extortionate, whereas the loan seems to be.

Or shall I just pay the loan extra payments directly?

Thanks.

Pixie5740

Do you currently owe any money on the credit cards? Which is the most expensive debt? I'm going to take a punt and say the Amigo loan is the debt with the highest APR which means it's the debt you should be throwing your money at to repay quickest. Not to mention that some eejit has guaranteed the Amigo loan (unless you're the one who did the guaranteeing and are now stuck repaying the Amigo loan) so it would be better for them to get the Amigo loan paid off too.

fwor

Have you checked that Amigo will accept payment by credit card? IIRC most loan companies won't, because they don't want to pay the CC company's transaction fees.

Levi-

As above, most loan companies won't take payment by credit card. That Amigo loans set up sounds awful, designed to lock you in forever. Maybe there is another way you can get it paid off (family or friend) to free you from that trap of it never coming down. You can make the same repayment but at least it will be actually bringing the debt down for a change. Good luck.

Bmth100

Amigo will accept credit card payments where the APR is lower than the interest on the loan (49.9% APR).

Common misconception about the £5K loans - people thinking that they're only paying interest. OP, assuming you took it over 60 months? Interest is calculated daily on the loan balance so you will see your balance come down more quickly as time goes on.

kloana

You're unlikely to be able to pay the loan off with a credit card, so the argument may be academic

Being as you've cleaned up your act a little, credit-wise, do you perhaps have access to a better APR loan, elsewhere? With the usual disclaimer that 'consolidation loans' have their own pitfalls, it'd still be worth looking into getting your borrowing costs down - if you're unable to make significantly higher payments in the meantime.

ratrace

Bmth100 wrote: »

Amigo will accept credit card payments where the APR is lower than the interest on the loan (49.9% APR).

Common misconception about the £5K loans - people thinking that they're only paying interest. OP, assuming you took it over 60 months? Interest is calculated daily on the loan balance so you will see your balance come down more quickly as time goes on.

Is this what they mean by front loading a loan ie: all interest is charged at the start of the loan then divided in to say 60 equal months of payments (5 years)

Marktheshark

You will need around 12k to pay off Amigo.
Thats some loan you got there !

Or rather the Guarantor did.

thecourtjester_101

Thanks to everyone for their responses.

I'm the one paying the loan, and my mum guaranteed me. It was to finance a new front porch last year after frost and high winds blew my other one down.

Given my credit at the time, and with no front door, it was really one of very little options open to me.

Not everyone gets themselves into their own debt (when you're married for over 10 years you should have no reason to distrust your spouse) and I've had to spend a lot of time and money getting myself back in the green again and finance a divorce, so it's always easy for strangers to judge when they don't know all the circumstances.

It seems by the majority of the lovely positive responses that the best possible thing will be to actually try and pay off more against the loan thereby reducing the interest that is accumulated daily and charged monthly.

It is not a front loaded loan sadly. Interest is accumulated daily, and then applied at your payment date. My loan repayment is £197, and by the time the month's interest has built up, my payment is only wiping off between £10-£30 of the capital.

My mum is retired so now living on savings and a limited income through pensions, and also funding my father's dementia care, so I don't really wish to burden her with my financial issues.

Thanks everyone.

sniggings

thecourtjester_101 wrote: »

Thanks to everyone for their responses.

I'm the one paying the loan, and my mum guaranteed me. It was to finance a new front porch last year after frost and high winds blew my other one down.

Given my credit at the time, and with no front door, it was really one of very little options open to me.

Not everyone gets themselves into their own debt (when you're married for over 10 years you should have no reason to distrust your spouse) and I've had to spend a lot of time and money getting myself back in the green again and finance a divorce, so it's always easy for strangers to judge when they don't know all the circumstances.

It seems by the majority of the lovely positive responses that the best possible thing will be to actually try and pay off more against the loan thereby reducing the interest that is accumulated daily and charged monthly.

It is not a front loaded loan sadly. Interest is accumulated daily, and then applied at your payment date. My loan repayment is £197, and by the time the month's interest has built up, my payment is only wiping off between £10-£30 of the capital.

My mum is retired so now living on savings and a limited income through pensions, and also funding my father's dementia care, so I don't really wish to burden her with my financial issues.

Thanks everyone.

you might find you can help your mum more if you got rid of the loan stress.

Could she not lend you the money and you paid her back the £197 a month instead?

For the sack of asking,it seems daft toe stuck with such high interest.

CLAPTON

ratrace wrote: »

Is this what they mean by front loading a loan ie: all interest is charged at the start of the loan then divided in to say 60 equal months of payments (5 years)

no, there are no loans in the UK that do that : i would be illegal.