loan advice

amber_man

I am considering a loan to make some home improvements. They may add to the value of my house but we're not planning on selling the house any time soon.

I'd like to borrow somewhere in the region of 7k.

I am permanently employed on a salary of 49k. Own a house worth 235k with 55k equity. Have a credit card I use regularly, no defaults, credit limit of 10k but I only ever use about 500 quid of it. Also have an interest free overdraft - use it monthly but could get out of it very easily. Have about 8k savings.

Never had a loan before. Can anyone give advice if I am likely to be accepted, and what kind of repayments I should be looking at? I have about 700 a month disposable income after all food, petrol, bills etc but before savings are taking into account. This will go up to about 900 a month in the next year, once I finish paying my student loan.

Just a bit worried as I have been VERY debt adverse up to now, but this is for a home improvement that is very necessary.

[Deleted User]

There doesn't appear to be anything in your circumstances that shouts automatic decline, although it may be wise to stay out of your overdraft.

Repayments will be determined by the rate and terms of the loan.

jonesMUFCforever

Most lenders will bite your hand off but perhaps look at the difference in rates a £7.5k loan would be compared with £7k.
Sometimes that slightly bigger loan will cost you less!

tonyh66

how can you have £700 disposible per month and still go into your overdraft?

AnotherJoe

Dont get a loan.
Purchase what you need on credit card.
Then transfer the whole balance to a 0% credit card offer. Keep transferring if need be, and pay off before the 0% term expires.

jonesMUFCforever

AnotherJoe wrote: »

Dont get a loan.
Purchase what you need on credit card.
Then transfer the whole balance to a 0% credit card offer. Keep transferring if need be, and pay off before the 0% term expires.

Is that really good advice?
A £7.5k loan could be got for 3.9% a credit card debt not paid after the promotional period ends could cost more (3% or so to begin with and 3% or so on subsequent transfers).

A loan which lets you overpay without charge could well work out cheaper.

amber_man

overdraft because the mortgage comes out just before I get paid - need to change the date, really - it's just a flow and timing thing that happened because when we bought the house, we were renting somewhere and had to pay rent and mortgage same month. I can top it up from savings.

foxy-stoat

If you have
£700 disposeable income a month
£8000 in savings
At least £9000 avaliable credit on a credit card

Why do you think you need a loan?

Cheapest way is to use savings and put £700 a month back in them - in 10 months your back to £8000

Another way is to use your credit card to buy what you need and make £700 a month payments, you should pay very little interest.

Not worth trying to get more credit.

amber_man

I need a loan because the improvement I want to make costs more than I have saved (budget is 15k, I have 8 in savings and would like to borrow about 7, and the interest rates on loans are much cheaper than the interest rate on my credit card.

Am I missing something?

Fair enough, a 0% credit card would be cheaper than a loan, but am I likely to get one with a 10k limit on purchases?

[Deleted User]

amber_man wrote: »

Fair enough, a 0% credit card would be cheaper than a loan, but am I likely to get one with a 10k limit on purchases?

It's certainly not impossible. But it depends on your circumstances.

MallyGirl

amber_man wrote: »

I need a loan because the improvement I want to make costs more than I have saved (budget is 15k, I have 8 in savings and would like to borrow about 7, and the interest rates on loans are much cheaper than the interest rate on my credit card.

Am I missing something?

Fair enough, a 0% credit card would be cheaper than a loan, but am I likely to get one with a 10k limit on purchases?

can a credit card be used to pay for your 'improvement'? If not then you will need a money transfer card