Beginner Personal Loan Advice

LadyLanzarote

Hello,

After some research I have decided to apply for a personal loan to consolidate my credit card debt.

Never having applied for a loan before I am a little nervous about proceeding with the application incase I miss something like additional fee’s etc!

Does anyone have any advice for a newbie? I am looking for a £10000 loan to pay off credit cards that I have let get a little out of control so I only have the one monthly repayment with fixed interest.

I read that some loans have a higher interest rate initially because it’s calcuated based on the current amount owed, which makes sense. However my brother took out a loan and assured me he pays the same amount each month. How do I know which type I am signing up for ??

Many thanks in advance.
Rachael

Willing2Learn

Hi Rachael and welcome to the forum


Have you read the loan consolidation thread? If not, then click on the link below and have a read.
https://forums.moneysavingexpert.com/discussion/5567669/unsure-whether-to-consolidate-please-advise


The reason I am suggesting you have a good read, is to make sure you are fully aware of the risks when consolidating debts. Unless you are very good at keeping to a monthly budget and successful at managing your money, a consolidation loan can lead to a doubling of the debt. Are you good at budgeting and managing your money? Or does the current £10k debt indicate you may struggle?

LadyLanzarote

Hi,

Thank you. I’ve had a good read through yes. Just thought talking to people with experience of a loan might bring to light something I miss or overlook!

Definitely won’t have any repayment problems.
I’ve just got caught up in that vicious make a payment / interest added cycle so I feel I’m always chasing my tail trying to get the costs down at a reasonable rate. The end is not nigh !! The idea is with fixed payment and interest I can actually get the debt down and eventually paid off over couple years 👌🏼

Willing2Learn

Depending on your income and affordability tests during a loan application you may or may not get a positive loan outcome at the representative advertised interest rate...

Sorry, not able to be any more precise, as everything depends on your credit history and the data you submit in you loan application.

foxy-stoat

LadyLanzarote wrote: »

Hi,

Thank you. I’ve had a good read through yes. Just thought talking to people with experience of a loan might bring to light something I miss or overlook!

Definitely won’t have any repayment problems.
I’ve just got caught up in that vicious make a payment / interest added cycle so I feel I’m always chasing my tail trying to get the costs down at a reasonable rate. The end is not nigh !! The idea is with fixed payment and interest I can actually get the debt down and eventually paid off over couple years 👌🏼

Your probably spending on the credit cards as well as making the minimum payments - you need to address the cause of the problem.

Your better off posting up your debts with interest rates and minimum payments.

If you do manage to get a loan you may be in double the amount of debt in a couple of years time then you will have to look at BR or IVA.

engineer_amy

LadyLanzarote wrote: »

Hello,

After....

I read that some loans have a higher interest rate initially because it’s calcuated based on the current amount owed, which makes sense. However my brother took out a loan and assured me he pays the same amount each month. How do I know which type I am signing up for ??

Many thanks in advance.
Rachael

You have confused a few things here. I think what you are getting at is the interest is calculated on the current amount owed at any point - which at the start is obviously higher, but its not the interest rate that changes, but the proportion of interest to capital within your monthly payment that will change. IE your monthly payment will remain the same. Most personal loans are for a fixed interest rate over the agreed period and will not change if you keep to the agreed repayments.


Example (keeping numbers very simple) - you borrow £10,000 over X years at Y% interest. Your monthly payment is set at £200 per month. In month 1, £180 out of this £200 is interest, only £20 comes off the £10k originally borrowed. In month 2, it might be £179 is interest and £21 is capital. By month 40, this could be £15 interest and £185 capital. So the monthly payment is always £200, but the proportion of that payment divided between interest and capital will change.

zippygeorgeandben

Good luck in your decision it's up to you! (don't consolidate!)

Sncjw

How much is your credit card debt? How much do you earn.

LadyLanzarote

I take home about £1300 a month and currently pay about £400 a month in credit card payments (more than the minimum amounts but not enough to get ahead) ����!♀️

fatbelly

Would you not be better doing balance transfers to 0% cards?

LadyLanzarote

I have done to a point but I’m now getting frustrated without having lots of payments going out all over the place ! Want to simplify repayments, Have a budgeted amount going out each month so I can control my finances better ...