Should I consider a loan to cut interest costs

ava77

Hi, I've been considering a loan to pay off my debts.
I had a low credit score so applied for both a vanquis card and a capital one card. The idea was to use them to get shopping weekly, and pay it off monthly. But as with all things, that didn't work out to plan.
The plan is to borrow £15000 over 3 years. on the loan calculator it states that I will only pay £880 interest over the 3 years. Which is £1000's less than I'd pay if I where to carry on with these cards. Is this a good idea, or am I just deluding myself?
My credit score at present is 639 used by lenders, and 899 on the public credit report, I have no idea if this is good or bad, and if I have a chance at getting a loan?

sourcrates

Hi,
You may be deluding yourself.

Are your debts defaulted, or are you up to date with everything ?

You are considering a consolidation loan, essentially paying debt with debt, not often a good idea.

The times this question is asked, every couple of weeks on average, the downside is that it's quiet common for people who consolidate there debts to keep the lines of credit they have paid off, open, so the temptation to re-spend is always there.

And re-spend they do, and 12 months down the line, they post back on here, begging for help, with twice the debt they previously had, so unless your extremely tough with yourself, and don't take any further credit, you will end up the same.

Not to mention if your credit score is poor, you won't get the loan anyway, the low APR you quote is only available to people with an excellent credit score, the average APR will probebly be a lot more.

Lots of people on this forum have been down this road, myself included, and all have said its the worst decision they ever made, so NO is my advise, for what it's worth.

ava77

Thank you for your honesty, it is very much appreciated.
At the moment I am up to date with all my debt repayments. My credit score is actually surprising good. Although I do need to close a number of accounts that have not been used in years but are still open, I have not defaulted on anything for 5 years, and the 2 accounts I did default on in 2011 are all paid off and closed in 2011.
The problems I am having is with the extortionate interest rates on both Vanquis and Capital one. By the time the interest is paid on both, the amount I can afford after this will take me longer than the loan will at 3 years, and cost me a lot more interest.
I do understand the traps of paying/ but not closing these accounts, but that is something that will not happen. I realize that you have probably all said this at one point or another, but I'm actually doing well on the paying off/closing of accounts now I understand that these stay open on your credit file. Its just these pesky little blighters.

fatbelly

If your credit rating is good (and the question arises why you have two sub-prime cards) then you could try 0% balance transfers

http://www.moneysavingexpert.com/credit-cards/balance-transfer-credit-cards-variant

There are also 'unofficial' 0% deals that may come up if you phone to cancel an old account.

https://forums.moneysavingexpert.com/discussion/33

ava77

Thank you for your response.
In answer to why I have two sub-prime cards, the answer is because I got the first (capital one) in 2006, and the second (vanquis) in 2009. Trying to build up a credit rating, without understanding anything about my credit rating. All I knew about my credit rating really, back then was that I was only accepted for a step account, and it wasn't until 2010 that I was accepted for a current account.
I have 2 arreas, 1 default, and 1 arrangement on my credit report. All dating back to 2009/2010. Everything else is in the green.
If I am completely honest with you. I don't know much about balance transfers & loans. And a limited amount about my credit report:( it's only been today that I realised I have a lot of accounts (mobile phones etc) still open on my credit report from years ago that are no longer in use. I suspect this has/is causing me credit problems. My first port of call tomorrow will be to close all said accounts.

SeduLOUs

ava77 wrote: »

I have 2 arreas, 1 default, and 1 arrangement on my credit report. All dating back to 2009/2010. Everything else is in the green.

Even with a really old default you won't get anything like the interest rate you were quoted for the loan, if you are accepted at all.

Do a soft search on the MSE card eligibility checker to see what options you have with regard to transferring some of the balance to a 0% card, but bear in mind they aren't going to give you £15k off the bat - possibly more like £500-£1000.

The next step might be to post in the debt-free wannabe board - post a statement of affairs and people will give you lots of helpful advice on savings you can make in your general expenses and hopefully you'll be able to make some decent headway.

Good luck!

Pixie5740

Are you paying to get a credit rating from Experian, Equifax or Call Credit? If so cancel your subscription. None of them lend money so who cares what number they assign you as there's no such thing as a universal credit score.

andyfromotley

ava77 wrote: »

Hi, I've been considering a loan to pay off my debts.
I had a low credit score so applied for both a vanquis card and a capital one card. The idea was to use them to get shopping weekly, and pay it off monthly. But as with all things, that didn't work out to plan.
The plan is to borrow £15000 over 3 years. on the loan calculator it states that I will only pay £880 interest over the 3 years. Which is £1000's less than I'd pay if I where to carry on with these cards. Is this a good idea, or am I just deluding myself?
My credit score at present is 639 used by lenders, and 899 on the public credit report, I have no idea if this is good or bad, and if I have a chance at getting a loan?

Which is almost certainly what will happen once you take out this loan. (although i am hugely sceptical that you will get a loan of £15k) I would not advise this.

What you need to do is get your spending under control and hammer away at your debts. post an SOA on the DFW board for help and advice. 0% cards may help but again, unless you can spend less than you have coming in then nothing is going to work for you.

ava77

My finances at present

Vanquis £1000 interest £64pcm
Capital one £1810 interest £56pcm
Next catalog £570 interest £9pcm
Argos card £400 need to pay by August 30th to get it interest free
Car finance £3308.71

What I pay monthly is.

Vanquis £200.
Capital one £150
Next £100
Argos £100
Car £209.91

Weekly I pay £32.50 to clear the interest.

It's a lot.
We have 4 children, all of which are still very much financially dependant upon us. We live on a very tight budget, which is great until one or more of the kids need clothes/shoes, school trips etc.
All of these are not budgeted for, so most months I end up paying less on the debts ��
My husband and I have done everything on our own and frankly I've had enough. The cloths I wear are all from charity shops or eBay, and have had to last me for years. The kids are constantly nagging for stuff, even trips to the seaside cost. Petrol pricing is rediculous.
Sorry, I know I'm whinging. My home is in a complete state of disrepair. I have nothing to sell to boost my finances, as everything is used until it is on its last legs. That's when the credit cards/store cards come in handy, to replace things.
I'm just soo very !!!!ed of with things right now.
I wanted the loan to pay off all the debts and get the house sorted out. The thing is, I know deep down that we don't stand a chance of getting this loan, things are just getting on top of me right now.

Again, big SORRY for going on.

SeduLOUs

You're doing well there. I have to ask why you wanted to borrow £15k when your 'overall debt' is only about half of that? If you are struggling with debt repayments, now is not the time to borrow significant sums of money to do up the house.

Try the eligibility checker to see if you can get a long term 0% transfer card to shift the Vanquis and/or Capital One to (both if you can, but if you can't get a limit for both do as much of whichever charges the highest APR) and close the cards when the balance is shifted to avoid being tempted to spend again.

Then starting working through the other cards/catalogues as quickly as possible starting with targeting whichever charges the highest APR and only paying minimums on the rest.

With regard to budgeting and keeping a closer eye on where you are spending I would recommend YNAB. It costs £30 but to me is worth it's weight in gold - you can do a free trial for 30 days and see what you think. There are some advice threads about it on here and many people swear by it.

If you would like some advice and help on general areas to cut back, please fill in an SOA - http://www.stoozing.com/calculator/soa.php

It sounds to me like it's not quite as bad as you actually think, but without seeing the overall picture it's difficult to say.

Vikipollard

ava77 wrote: »

Hi, I've been considering a loan to pay off my debts.

The plan is to borrow £15000 over 3 years. on the loan calculator it states that I will only pay £880 interest over the 3 years. Which is £1000's less than I'd pay if I where to carry on with these cards. Is this a good idea, or am I just deluding myself?

ava77 wrote: »

My finances at present

Vanquis £1000 interest £64pcm
Capital one £1810 interest £56pcm
Next catalog £570 interest £9pcm
Argos card £400 need to pay by August 30th to get it interest free
Car finance £3308.71

What I pay monthly is.

Vanquis £200.
Capital one £150
Next £100
Argos £100
Car £209.91

Weekly I pay £32.50 to clear the interest.


Again, big SORRY for going on.

Why on earth are you considering a loan for £15000 when your debt is £7089? Even IF you get a low interest rate, you would still be borrowing more than twice what you owe.


Please don't do this. Consolidation just doesn't work for the vast majority of us (me included). Yes, it sucks struggling, but you will be in a much worse place with double the amount of debt in a loan (if you can get one) plus running the cards up again.


Sorry if this sounds harsh - been there, done that and ended up with an IVA. Try the snowballing thingy on here to see if that gives you some realistic hope to help keep you chipping away at the debt.