Should I take out a bank loan?

first78

I'm not very savvy when it comes to money and am trying to make the best choice possible as I'm moving house in the next 3-5 weeks and my mortgage is going to be almost 3 times what I am currently paying.
My wife and I both bought cars on finance in the last 12 months. Mine is being repaid over 5 years and I've just paid the first year. I borrowed £7350 and will repay £10409. I've never had a car on finance before...is it possible to repay it early without incurring penalties? What I'm wondering is whether to take a bank loan to pay off both cars.
In addition due to needing to buy a larger property it is going to use all our savings, so I wondered about taking out a loan that would pay off the cars and give us £3-5k to buy the furniture we need and have a small safety net left over.
Can anyone offer any advice about whether I could repay the cars off like this and whether a bank loan would be a good idea? Many thanks.

[Deleted User]

If you can get a loan at a lower rate, then it could be a good idea.  However, your current indebtedness and need for further borrowing simply for furniture means you'll probably struggle to get a decent rate.

Get your furniture from friends, family and Freecycle.

And definitely don't borrow for a 'safety net'.  That's what your savings are for, so rebuilding those needs to be your first priority.

DrEskimo

To be perfectly honest it sounds as if you are desperately stretching yourself with debt and putting yourself in a very precarious position...

Whether you can pay of the car finance without penalty will depend entirely on your specific agreement. Find the contract and read the terms and conditions you agreed to.

Whether you can get a loan to consolidate both your car's and your furniture and borrowing a 'safety net' will depend entirely on your income, outstanding debt (beyond those you have on the cars) and your credit history. It may well be very difficult after you have just moved and with less disposable income due to your new mortgage.

I would strongly urge you to head to the debt free wannabe forum and get a handle on your finances. I would advocate getting a small emergency fund of £1,000, getting rid of the cars and reducing your debt on those significantly and buying something much cheaper, and then working out a tight budget to save for the things you need. You need to stop being so reliant on credit.

first78

DrEskimo said:

To be perfectly honest it sounds as if you are desperately stretching yourself with debt and putting yourself in a very precarious position...

Whether you can pay of the car finance without penalty will depend entirely on your specific agreement. Find the contract and read the terms and conditions you agreed to.

Whether you can get a loan to consolidate both your car's and your furniture and borrowing a 'safety net' will depend entirely on your income, outstanding debt (beyond those you have on the cars) and your credit history. It may well be very difficult after you have just moved and with less disposable income due to your new mortgage.

I would strongly urge you to head to the debt free wannabe forum and get a handle on your finances. I would advocate getting a small emergency fund of £1,000, getting rid of the cars and reducing your debt on those significantly and buying something much cheaper, and then working out a tight budget to save for the things you need. You need to stop being so reliant on credit.

Thanks. I've looked at the early repayment sections of the contract for both cars, but don't really understand what it means. I'll ask for help in the debt free wannabe section. We are not in a position to swap our cars as we really need the ones we have. If it's possible to pay less interest with a loan that just seemed like the more sensible option. 

DrEskimo

first78 said:

DrEskimo said:

To be perfectly honest it sounds as if you are desperately stretching yourself with debt and putting yourself in a very precarious position...

Whether you can pay of the car finance without penalty will depend entirely on your specific agreement. Find the contract and read the terms and conditions you agreed to.

Whether you can get a loan to consolidate both your car's and your furniture and borrowing a 'safety net' will depend entirely on your income, outstanding debt (beyond those you have on the cars) and your credit history. It may well be very difficult after you have just moved and with less disposable income due to your new mortgage.

I would strongly urge you to head to the debt free wannabe forum and get a handle on your finances. I would advocate getting a small emergency fund of £1,000, getting rid of the cars and reducing your debt on those significantly and buying something much cheaper, and then working out a tight budget to save for the things you need. You need to stop being so reliant on credit.

Thanks. I've looked at the early repayment sections of the contract for both cars, but don't really understand what it means. I'll ask for help in the debt free wannabe section. We are not in a position to swap our cars as we really need the ones we have. If it's possible to pay less interest with a loan that just seemed like the more sensible option. 

There should be something in there about early repayment fees or early settlement fees. In my experience, there rarely is early settlement fees on car finance, but every agreement will be different.

In principle you are right, but in reality you may find it difficult to get accepted for a lower APR loan given you are trying to borrow so much and are moving house with a bigger mortgage. As above, I would not aim to borrow any more for the furniture, and borrowing 'savings' is a very unwise thing to do.

I suspect you need a car, but don't 'need' a £7,000 one...a cheaper car will happily do the same job. It's up to you, but I would look very carefully at your debt obligations and income/outgoings. You need to ensure you have a healthy surplus to allow you to save and not have to constantly rely on credit to solve your problems. It's a path that never ends well unfortunately.

bradders1983

You say you are moving in 3-5 weeks? For the love of god, do NOT apply for any other credit until your mortgage completes!

molerat

A big mistake is taking car finance over 5 years on a used car.

foxy-stoat

If you take out a loan before you complete you risk the mortgage lender pulling your funds.  Dont do it.
If you think you can get a low interest loan to consolidate debt, on a good year, you probably wont.  
We are in the middle of a pandemic and lenders have tightened their lending, so I would hold applying for credit until say 6 months after you have moved in.

Clive_Woody

bradders1983 said:

You say you are moving in 3-5 weeks? For the love of god, do NOT apply for any other credit until your mortgage completes!

If you don't listen to any other advice on this thread please take note of the comment above.

If you apply for additional borrowing now then there is the risk that your mortgage offer might be withdrawn. Don't rush into anything as it looks like your level of debt is already concerning. Better to look at ways of saving money and the DFW forums is the place to get some great advice.

penners324

Look on Facebook Marketplace for furniture. I managed to get a 2 piece sofa set for £20, very good dining room table & chairs for £200, sideboard for the hallway for £30.