Please help! Loan my best option?!

jaybee1982

Hi guys,

I'm about to take the leap and apply for a loan but just want to know I've exhausted all options.

I have £7,000 outstanding on a Barclaycard at a 24% APR and I want this paid off within two years. The interest I'm paying is making me sick but am unsure whether to apply for a balance transfer as there's really no point if the limit I'm given is a lot lower than 7 grand.

My Noodle report has my credit at 3/5 at the moment.

greensalad

I'm not sure you will get a 0% balance transfer card with that credit rating. Saying that it most definitely IS worth moving it even if you get less than £7k offered. Let's do an example.

If you pay £250 off your £7k card every month, you'll pay it off in 3 years and 4 months. The total interest you'll pay is £2,847.

Lets say you're offered 0% interest for 24 months. But only for £2k.

If you move £2k to that credit card and keep paying £250, but split across both, then the following will happen:

You'll pay about £84 p/m to the 0% card and pay off £2k in 24 months, before your 0% deal ends (bear in mind your credit rating may improve in this time and you may be able to transfer to another 0% card!)

You will have continued to pay top interest on the £5k of debt on the credit card at £166 a month (that's £250 less the £84 you're paying on your 0%). In 2 years time when the 0% balance is up, you'll only have 1 year and 8 months left, but you will have saved yourself around £561 in interest in the whole process.

So it definitely makes sense to shift part of your debt to a 0% interest card, if you can get one. I believe it always makes sense to pay 0% on any part of your debt. It's saving you interest no matter what. And if you keep to your payments and improve your credit score in that time, you can do another balance transfer when the deal ends.

I think the key here is to only move a part of your balance onto the 0% card that you can comfortably pay in the set time before the interest rate goes up. If you move across £5k, but don't pay it, then you're liable to lose all the interest you've gained when the APR goes above 24% at the end (if it does). So only move what feasibly you can pay off in the time limit.

Whatever you do, make sure you pay all the balance off before the card stops being 0%.

jaybee1982

greensalad wrote: »

I'm not sure you will get a 0% balance transfer card with that credit rating. Saying that it most definitely IS worth moving it even if you get less than £7k offered. Let's do an example.

If you pay £250 off your £7k card every month, you'll pay it off in 3 years and 4 months. The total interest you'll pay is £2,847.

Lets say you're offered 0% interest for 24 months. But only for £2k.

If you move £2k to that credit card and keep paying £250, but split across both, then the following will happen:

You'll pay about £84 p/m to the 0% card and pay off £2k in 24 months, before your 0% deal ends (bear in mind your credit rating may improve in this time and you may be able to transfer to another 0% card!)

You will have continued to pay top interest on the £5k of debt on the credit card at £166 a month (that's £250 less the £84 you're paying on your 0%). In 2 years time when the 0% balance is up, you'll only have 1 year and 8 months left, but you will have saved yourself around £561 in interest in the whole process.

So it definitely makes sense to shift part of your debt to a 0% interest card, if you can get one. I believe it always makes sense to pay 0% on any part of your debt. It's saving you interest no matter what. And if you keep to your payments and improve your credit score in that time, you can do another balance transfer when the deal ends.

I think the key here is to only move a part of your balance onto the 0% card that you can comfortably pay in the set time before the interest rate goes up. If you move across £5k, but don't pay it, then you're liable to lose all the interest you've gained when the APR goes above 24% at the end (if it does). So only move what feasibly you can pay off in the time limit.

Whatever you do, make sure you pay all the balance off before the card stops being 0%.

That's really helpful info mate, thanks a lot.

According to the soft check I have a 90% chance of being accepted for Halifax card for balance transfer. Wonder if it's worthwhile going for this? There's a few others but this seems the best option.

34 months 0% 2.8% fee

jaybee1982

I've also got the following option from Llloyds

10 months 0% 0.4% fee.

Would be OK if that was part of the balance but I wont be able to clear the whole amount in that time.

greensalad

jaybee1982 wrote: »

I've also got the following option from Llloyds

10 months 0% 0.4% fee.

Would be OK if that was part of the balance but I wont be able to clear the whole amount in that time.

You'd need to do the maths on that.

What does the APR grow to after the time is over?

If it grows to less than 24% then you should be OK (include your 0.4% fee in the calculations).
If it grows to 24% then you might still be better off because of the amount you've paid off, however that 0.4% fee might impact your interest savings.
If it's over 24% then it probably won't help.

If you can give exact figures, we can work it out for definite.

jaybee1982

greensalad wrote: »

You'd need to do the maths on that.

What does the APR grow to after the time is over?

If it grows to less than 24% then you should be OK (include your 0.4% fee in the calculations).
If it grows to 24% then you might still be better off because of the amount you've paid off, however that 0.4% fee might impact your interest savings.
If it's over 24% then it probably won't help.

If you can give exact figures, we can work it out for definite.

Just found a Halifax 13 months one with no fee with the below details.

Halifax 13 months 0% No fee.

BT and spending length & fee: 13 months 0% Representative variable APR: 18.9% (Official APR Example)Card issuer: Mastercard Min income: N/A Min repay: Greater of 1% of balance plus interest or £5Will I get the full 0%? No. Some will get 9 months

jaybee1982

Ok so I just got accepted for Halifax 13 months 0% with no transfer fee. The limit has been given at 5250 and I've arranged for 4900 to be shifted onto this card.

haycorns

much better value than a loan - well done for exploring your options Suggest that once you have done the balance transfer you call barclaycard and get the limit reduced to £2000. You don't need the temptation of that available credit. prevent yourself from being sucked down a path you don't want to travel.

glentoran99

greensalad wrote: »

I'm not sure you will get a 0% balance transfer card with that credit rating. Saying that it most definitely IS worth moving it even if you get less than £7k offered. Let's do an example.

If you pay £250 off your £7k card every month, you'll pay it off in 3 years and 4 months. The total interest you'll pay is £2,847.

Lets say you're offered 0% interest for 24 months. But only for £2k.

If you move £2k to that credit card and keep paying £250, but split across both, then the following will happen:

You'll pay about £84 p/m to the 0% card and pay off £2k in 24 months, before your 0% deal ends (bear in mind your credit rating may improve in this time and you may be able to transfer to another 0% card!)

You will have continued to pay top interest on the £5k of debt on the credit card at £166 a month (that's £250 less the £84 you're paying on your 0%). In 2 years time when the 0% balance is up, you'll only have 1 year and 8 months left, but you will have saved yourself around £561 in interest in the whole process.

So it definitely makes sense to shift part of your debt to a 0% interest card, if you can get one. I believe it always makes sense to pay 0% on any part of your debt. It's saving you interest no matter what. And if you keep to your payments and improve your credit score in that time, you can do another balance transfer when the deal ends.

I think the key here is to only move a part of your balance onto the 0% card that you can comfortably pay in the set time before the interest rate goes up. If you move across £5k, but don't pay it, then you're liable to lose all the interest you've gained when the APR goes above 24% at the end (if it does). So only move what feasibly you can pay off in the time limit.

Whatever you do, make sure you pay all the balance off before the card stops being 0%.

surely your adding 4 months then? now its 3 years and 4 months but in two years time with the transfer it will still be 1 year and 8 months giving a total of 3 years and 8 months