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To Loan or not to Loan?

Hi all, newbie here and I require some Loan advice.

I am regularly stuck in my £500 bank overdraft with it maxed out before each payday. I do not live excessively and have just bought a house. I also have a Credit Card with £6k on it as well as a Car finance of £185 a month and training repayments to a previous employer of £180.

I am considering getting a bank loan to pay off the credit card and the payments to my employer which will offset approximately £280 in outgoings each month.

Is it worth my while getting a loan for approx £8,000 for 3 years to consolidate and reduce my outgoings, whilst also actually seeing another £500 in my account each month by not being overdrawn.

Advice much appreciated!

Comments

  • A consolidation loan typically leaves you worse off, as the interest over 36 months will usually be more than you would have paid servicing your debts as you are now.

    You would find it very useful and beneficial to complete an SOA (Statement of Affairs) and then copy & paste it over to a new thread in the main Debt-Free Wannabe (DFW) board.

    Edit: And welcome to the forum Money93 :)
    I work within the voluntary sector, supporting vulnerable people to rebuild their lives.

    I love my job

    :smiley:
  • ReadingTim
    ReadingTim Posts: 4,087 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    You may not think you're living excessively, but the fact is you're spending at least as much as, if not more than you earn, and the only way to get out of debt is to spend less than you earn.

    Consolidation loans rarely work, and you can't borrow your way out of debt, so forget the financial cleverness and just concentrate on spending less and earning more.

    Sorry if this isn't the answer you want to hear.
  • foxy-stoat
    foxy-stoat Posts: 6,879 Forumite
    Eighth Anniversary 1,000 Posts Name Dropper
    Money93 wrote: »
    Is it worth my while getting a loan for approx £8,000 for 3 years to consolidate and reduce my outgoings, whilst also actually seeing another £500 in my account each month by not being overdrawn.

    Advice much appreciated!

    You probably wont be able to get a £8000 over 3 years at the lowest rate, expect the interest rate to be in double figures.

    By all means apply for 1 or 2 but I would concentrate in what has already been said.
  • Better idea. Get a loan for around £15k over 7 year period... pay off all other loans (providing the rate of new loan is lower), use the remaining to sort out your issues and stop over spending...


    Taking out a loan for precisly the amount you need is silly... it never works, because some other problem will arise and your new loan will be short, back to square one.
  • Sncjw
    Sncjw Posts: 3,582 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    Stupid advice bobby.


    If you are struggling now to pay your debts and in overdraft you will struggle to get a loan.

    The loan is doubling your debt and the lender will asses you on double the debt. There is no garuntee you will use this money to pay off your debts.

    Surely if your using your over draft every month it means your struggling with money
    Mortgage free wannabe 

    Actual mortgage stating amount £75,150

    Overpayment paused to pay off cc 

    Starting balance £66,565.45

    Current balance £56099

    Cc around £3200 

  • Bobby.
    Bobby. Posts: 8 Forumite
    edited 26 September 2019 at 3:30AM
    Sncjw wrote: »
    Stupid advice bobby.


    If you are struggling now to pay your debts and in overdraft you will struggle to get a loan.

    The loan is doubling your debt and the lender will asses you on double the debt. There is no garuntee you will use this money to pay off your debts.

    Surely if your using your over draft every month it means your struggling with money


    not true,

    1) the loan isnt doubling debt if used to pay off the first debt... mute point

    2) money93 could be struggling with money because of being stuck in a loop with not enough to get out. thus getting a 7 year loan would reduces his current monthly payments and may allow him/her to slowly get back on track.

    the only valid point you have is that money93 may struggle to get a loan, but this is not a fact.

    dont make such simple assumptions.
  • boo_star
    boo_star Posts: 3,202 Forumite
    Part of the Furniture 1,000 Posts
    Bobby. wrote: »
    not true,

    1) the loan isnt doubling debt if used to pay off the first debt... mute point

    2) money93 could be struggling with money because of being stuck in a loop with not enough to get out. thus getting a 7 year loan would reduces his current monthly payments and may allow him/her to slowly get back on track.

    the only valid point you have is that money93 may struggle to get a loan, but this is not a fact.

    dont make such simple assumptions.

    1. It often is. Many consolidation loans fail because the person just racks up the debt on their cards again, basically doubling the debt. And being pedantic it's a "moot" point, not mute.

    2. Nothing in the OP indicates they're struggling, just looking to pay less. The problem is that it's based on the belief that they'll get the headline rates. They won't, and advising them to take out a loan over 7 years is utterly bonkers.

    Your advice is bad. Stop giving it.
  • fatbelly
    fatbelly Posts: 23,233 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Cashback Cashier
    Your issue is interest. I suspect the employer repayments are already interest-free so it makes no sense to transfer that to an interest bearing solution.

    The car repayments are probably low interest as the debt is effectively secured. I assume it's HP/PCP. You can terminate this (at any time) and walk away (with no remaining liability once you have paid 50%), which is worth looking into.

    Your overdraft is only £500. Some options here

    https://www.moneysavingexpert.com/banking/compare-best-bank-accounts/#overdrawn

    You should be able to BT your credit card to 0% - use the eligibility checker first

    https://creditcards.moneysavingexpert.com/?balance-transfer&_ga=2.258771843.828388249.1569102401-370800224.1507305729
  • MEM62
    MEM62 Posts: 5,372 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    Bobby. wrote: »
    1) the loan isnt doubling debt if used to pay off the first debt... mute point
    I believe the phrase you are looking for is 'moot point'.

    Whilst offering advice to help other is laudable, if you are going to do so you really need to stick to areas where you have some expertise.

    Sncjw was correct, your advice is flawed for many reasons, most of which others have already commented on. In respect of you comment above you are failing to understand that any lender will assess risk and affordability based on the whole debt - the current debt and new debt. It is not a moot point. They will not make any assumption that current borrowing will be paid off with the new borrowing - even when the loan purpose is consolidation - as there is no way that the lender can ensure that the funds are used for this purpose.
  • ReadingTim
    ReadingTim Posts: 4,087 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    Bobby. wrote: »
    1) the loan isnt doubling debt if used to pay off the first debt... mute point

    Pop over to the Debtfree wannabe forum to see how moot that point is in real life. Lenders don't believe you'll repay one loan with the other, and that forum illustrates it.

    The only thing you need to mute is your poor advice.
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