What should we do?

Alex11392

Hello,

We are a very recently married couple who have recently bought a house.

We have debts totalling approximately £15000
Credit card 0% interest £3700
Career loan 9.9% interest £5000
Car loan 2.5% interest £5000
Sofa finance 0% finance £1000

I have also recently paid off another credit card at £2000

We have another £2000 in savings and no planned big expenditures.

We earn £38000 a year between us and at our current repayments we have hardly anything left at the end of each month. Based on current repayments and current earnings we should be debt free in 3 years.

We have work to do on our house and want to travel a bit. I have looked into getting a 5 year loan to consolidate our debts. Repayments are around half of what we pay at the moment so will allow us to put the extra money towards travel and the house and build up a nest egg.

So ultimately my question is, should we pay off our debt in 3 years and struggle to do the house up and travel or get a loan to consolidate the debt but be in debt for 2 extra years?

Thank you.

-taff

Up to you.

Borrowing money to use as a nest egg is a bit silly though.

Borrowing to consildate debt is not really helping though because all you're doing is extending the amount of time you're in debt for. You're not clearing it, you're not paying extra, you're not gving yourself a cushion against anythig.

You're just deeper in debt for longer than you are now.

Nebulous2

Unfortunately you can't afford to go travelling at the moment. The main reason for that is that you previously bought stuff you couldn't afford on credit. Effectively you're spending your future income now, which means you won't have it later.

Consolidation doesn't often help. It gives the illusion of lower monthly payments by spreading it out over a longer period.

Lots of us have been there though. Buying a house is expensive and people are often very stretched. I'd concentrate on paying debt down. The career loan looks as though it is costing you the most interest wise. It might be the place to start.

DCFC79

You either increase your income or cut back on your spending. Do you have expensive phone contracts ?

Do you buy branded clothing ?

Do you buy food brans when shopping ? If you dont already give Aldi or Lidl a try for food.

These are just suggestions mind, you might have these knucled down.

AliceBanned

Do you really need the car? Can you get out of the contract and drive an older car instead?


It may not be appealing to you but that's what I'd do in your circumstances. That's an area where you might be able to cut back straight away.


Not a good idea to consolidate as you will end up borrowing even more because your travelling and money spent on the house will suddenly feel easy to do.


It's hard knowing you will be stretched for another 3 years but you don't have to be.

Money_Rollercoaster

Really, the only target for some sort of re-jig is probably the career loan. Have you looked at eligibility for a different loan provider and keeping / reducing the term (36 months)? MSE highlights rates from 3.6% for the £5k-£7.5k bracket ...


http://www.moneysavingexpert.com/loans/cheap-personal-loans#5k75k


I think your problem is that you want it all in one tidy package, when really it makes no sense to convert the 2.5% car loan or 0% finance / credit card balances to a higher interest rate.

MEM62

Alex11392 wrote: »

So ultimately my question is, should we pay off our debt in 3 years and struggle to do the house up and travel or get a loan to consolidate the debt but be in debt for 2 extra years?

This really is a no-brainer. You are newly married. Get rid of your debt. If you borrow more I'll predict a future post; "Please help - My husband and I have £xxx of debt and I am expecting a baby. We will struggle to keep up debt repayments while I am on maternity leave."

forgotmyname

Is the £2000 in savings earning more than 9.9% interest of your carrer loan? Pay the £2000 towards it?

Or the 2.5% car loan making more interest than that? If not pay towards that instead.

If you can put that £2000 towards the 9.9% career loan you will save a few quid. And allow you to put more money towards paying the rest off.

zippygeorgeandben

Do you want to turn a 3 year debt into a new 5 year one? Do you want to be debt free in 2020 or 2022? Your circumstances may change also. Have you got an emergency fund set up?

Dobbibill

You need to put together a SOA if you 'have hardly anything left' then you need to see exactly where your money is going - post it here if you want or keep it to yourself to review, it's up to you.

Consolidation doesn't work for most - have a look for the horror stories of how it went wrong for so many, they are all over the forum. You cannot borrow your way out of debt so if you really want to travel in the future, start sorting things out now.

parking_question_chap

Borrowing more will not help.

Spending money on luxuries you cant really afford will not help.

You just need to accept the next 3 years will be pretty frugal, get it paid then you are in a much better situation for the rest of your lives. Guarantee if you decide to borrow more you will regret it after three years.

As above, be critical on your own spending, mobiles, cars, designer brands etc.