Is a personal loan the right choice?

Victory7s

Good evening all,

With the upcoming changes to the overdraft charges, I'm currently having a think about my debt situation and what would be the best way to address it.

I'm 24, a graduate and last year purchased my first home.

Like most students, I'm current 'sat' in my overdraft of £2,000 and have a credit card that I've £2,800 debt on.

I graduate buffer means I only pay interest on the first £1,000 of my overdraft, that will however end in September 2020.

Would taking a personal loan of £5,000 to pay off my overdraft and credit card be a sensible solution? I've looked online and found lenders who offer £5,000 loans at a fixed rate of 3.5% over 2-years.

I currently pay 10% on my credit card and 17.5% (soon to be 39.5%) on my overdraft. I have roughly £400 spare each month after mortgage, utility bill and food expenditure.

Any / all advice welcome! Thanks

WhenIam64

Standard advice is

a) Don't use debt to pay debt
b) Clear the debt rather than spend.
c) If you want help on where to save, then put up a Statement of Account

Apologies if this appears to be trivial, but it sometimes needs repeating.

DCFC79

Victory7s wrote: »

Good evening all,

With the upcoming changes to the overdraft charges, I'm currently having a think about my debt situation and what would be the best way to address it.

I'm 24, a graduate and last year purchased my first home.

Like most students, I'm current 'sat' in my overdraft of £2,000 and have a credit card that I've £2,800 debt on.

I graduate buffer means I only pay interest on the first £1,000 of my overdraft, that will however end in September 2020.

Would taking a personal loan of £5,000 to pay off my overdraft and credit card be a sensible solution? I've looked online and found lenders who offer £5,000 loans at a fixed rate of 3.5% over 2-years.

I currently pay 10% on my credit card and 17.5% (soon to be 39.5%) on my overdraft. I have roughly £400 spare each month after mortgage, utility bill and food expenditure.

Any / all advice welcome! Thanks

Did you not see Martins show on ITV last night ?


He covered loans.


The debt you have is is small, if you look at your finances I'm sure you could make some cut backs to then put toward paying the debts.

MidsHollie

If you have £400 spare each month, you could pay off your debt with that in 12 months. If I were you, I would do an SOA to see exactly how much you have spare. Get a handle on your costs and the debt now, and it will set you up well. I never got a proper handle on my debt after uni and now have 3-4 years to fully regret that as I pay back debt!

fatbelly

If lenders will offer you £5,000 loans at a fixed rate of 3.5% then you will get a 0% balance transfer credit card easily.

Jonathan_Kelvin

Victory7s wrote: »

Good evening all,

With the upcoming changes to the overdraft charges, I'm currently having a think about my debt situation and what would be the best way to address it.

I'm 24, a graduate and last year purchased my first home.

Like most students, I'm current 'sat' in my overdraft of £2,000 and have a credit card that I've £2,800 debt on.

I graduate buffer means I only pay interest on the first £1,000 of my overdraft, that will however end in September 2020.

Would taking a personal loan of £5,000 to pay off my overdraft and credit card be a sensible solution? I've looked online and found lenders who offer £5,000 loans at a fixed rate of 3.5% over 2-years.

I currently pay 10% on my credit card and 17.5% (soon to be 39.5%) on my overdraft. I have roughly £400 spare each month after mortgage, utility bill and food expenditure.

Any / all advice welcome! Thanks

Why, if you owe 4,800, would you borrow £5,000? What’s the extra for, just a bit of a treat to take your mind off the debt, using a bit more borrowed money?

Why not borrow £4,000, and then work as hard as you can to cut the remaining overdraft?

Victory7s

Jonathan_Kelvin wrote: »

Why, if you owe 4,800, would you borrow £5,000? What’s the extra for, just a bit of a treat to take your mind off the debt, using a bit more borrowed money?

Why not borrow £4,000, and then work as hard as you can to cut the remaining overdraft?

Lenders give better interest rates at intervals. If I pay take the extra £200, I get 3.5% instead of 7.5%.

I wouldn't want to borrow any more than I would have to but I'd pay much less on repayments by borrowing that little extra.

Victory7s

fatbelly wrote: »

If lenders will offer you £5,000 loans at a fixed rate of 3.5% then you will get a 0% balance transfer credit card easily.

I'm unsure whether I'd be able to transfer over my overdraft, which is the main reason for me addressing this situation.

Victory7s

MidsHollie wrote: »

If you have £400 spare each month, you could pay off your debt with that in 12 months. If I were you, I would do an SOA to see exactly how much you have spare. Get a handle on your costs and the debt now, and it will set you up well. I never got a proper handle on my debt after uni and now have 3-4 years to fully regret that as I pay back debt!

WhenIam64 wrote: »

Standard advice is

a) Don't use debt to pay debt
b) Clear the debt rather than spend.
c) If you want help on where to save, then put up a Statement of Account

Apologies if this appears to be trivial, but it sometimes needs repeating.

I would normally be inclined to agree. I don't see borrowing money as a great solution. However, paying 50% across my overdraft and credit card equally doesn't seem like a great idea.

People have suggested that I can pay the debt off in 12-months. Although correct, I'd be paying nearly £1,000 in APR. Whereas, I can pay as little £200 by 'spreading the cost' with a personal loan.

fatbelly

Victory7s wrote: »

I'm unsure whether I'd be able to transfer over my overdraft, which is the main reason for me addressing this situation.

https://www.moneysavingexpert.com/banking/cut-overdraft-costs/

monetxchange

I used a 0% balance transfer credit card to deposit money into my account to clear the overdraft. It was a Virgin card. Very simple and straightforward.