Please help - to refinance or not

natascha

Long time reader on these forum, but first time asking a question.
I was just wondering which you think would be the best option. My husband and myself are currently trying hard to be debt free within 5 years (or sooner if possible!). I currently have a loan with my bank with 10k paying 10% APR. This will be paid off december 2019.
We also have three credit cards (two fixed at 4.9 for life of balance with 9k on one and 5k on the other, the third card has £2k on and has no deal on that).
My bank has just offered to refinance my loan for 5 years, paying off the credit card with 2k on with 3% APR, which would save us £50 a month.
My question is do I do this and therefore have the loan for longer but with less monthly payments or do I do a balance transfer to one of my other credit cards and just continue to throw as much money as we can at it?
Thanks, any help would be much appreciated. Hope this makes sense.

mrsbee17

Personally, I'd not refinance; if you are affording the repayments at the moment, keep going as you are for the sake of £50; this is adding (around) another 2 years of repayments. If you are really struggling and would greatly benefit from that £50 in your pocket, then that may be the option.

Get a SOA together and see how much you are able to pay off your debts; I'd think you're better off getting rid of the highest interest rate card first - what is the rate on the 2k CC?

sourcrates

The thing you have to realise is banks only make these offers when it's beneficial to them, it would keep you in debt for a further two years, for the sake of fifty quid a month, not a great deal in my eyes !!!

dancingfairy

If you are cutting your interest from 4.9 %to 3% it may be a good idea if you can save that 50 a month and use it to get debt free quicker. If it just means you save 50 a month but end up paying over a longer period I'm not sure that that would be good psychologically at least.
If you took out the loan could you overpay? Would this save interest ( ie is the balance you owe them recalculated and interest then reduced accordingly)?
You could also save that 50 a month and pay it off at the end ( assuming there are no exit penalties or such like) ?
If you are disciplined and understand what you are doing and why then refinancing may work for you.
If you can't overpay or end the loan early without penalty or are likely to spend the extra 50 a month then it won't help.
Df

dancingfairy

Have a play with the snowball calculator ( I'm sure someone will post a link for you). If done right then it would bring your debt free date forward ( It would be interesting to see by how much).
Df

natascha

Just wanted to say thank you for all your replies. I had a little play with the snowball calculator, was really inspiring to see in 3 years we could be debt free. From this we have decided to not refinance and instead work towards becoming debt free in 3 years or less. Very excited to focus on this!