Joint loan or not?

weston800

Hi all, I’ll start with the background; we’re an unmarried couple, early 30s with no dependants (due to Wed in summer 2022). We live together in our first house with a joint mortgage, we’ve been here almost 3 years (Feb). I am PAYE employed full time earning 22k PA and my fella has been self-employed for 2.5 years, on average he earns 24k PA. 

We have £9k debt (3x credit cards and a small overdraft, CCs are in single names, OD is joint). There is no interest added on our credit cards at present). After a long talk about our finances and how to get our debts down, we are considering a consolidation loan of £9k over 2 years. 

Our credit history is good. 

We’ve used the loan eligibility by logging into our MSE CreditClub accounts and it looks as though either one of us could apply for this loan (80-90% approval rate), however; are there any benefits to applying for a joint loan? And does the fact that my fella is self-employed cause any potential problems? He got the mortgage jointly with me when he was still a PAYE employee. 

Also, we do have a joint bank account for the mortgage and bills but our wages do NOT go into the joint account. We have our own bank accounts and we simply transfer into the joint account monthly. Our accounts are all with Lloyds. 

We also have a standard joint savings account with RBS that we started paying into 12 months ago, we don’t have pensions so wanted to start a fund for when we get to our pension age. We have £1300 in there at the moment but neither of us want to ‘dip’ into it. 

Thanks all 

DrEskimo

Dont consolidate. Particularly as you will be swapping 0% interest debt to interest bearing. Get over to DFW and post a SOA. Get a budget, work out where you can cut spending and look at snowballing your debts with additional payments.

Keep your savings as a starter emergency fund, but don't save anymore. Use all surplus funds to pay down debts.

Seriously consider setting up a pension. Ask your partner to look into setting up a SIPP. Paying into a pension will reduce your income tax, so it will earn more. It will also be invested over a long period so will provide better returns then any saving account. As you as a PAYE, you are just throwing away free money by not being part of a work place pension. Sign up to it and start paying into a pension.

Thrugelmir

weston800 said:

After a long talk about our finances and how to get our debts down, we are considering a consolidation loan of £9k over 2 years. 

To get your debts down. Focus on your where you are spending your money. Don't consolidate. 

weston800

DrEskimo said:

Dont consolidate. Particularly as you will be swapping 0% interest debt to interest bearing. Get over to DFW and post a SOA. Get a budget, work out where you can cut spending and look at snowballing your debts with additional payments.

Keep your savings as a starter emergency fund, but don't save anymore. Use all surplus funds to pay down debts.

Seriously consider setting up a pension. Ask your partner to look into setting up a SIPP. Paying into a pension will reduce your income tax, so it will earn more. It will also be invested over a long period so will provide better returns then any saving account. As you as a PAYE, you are just throwing away free money by not being part of a work place pension. Sign up to it and start paying into a pension.

Thanks for you help I will definitely look into SIPP and a pension for me. 

Sorry what’s DFW and SOA?

CSL0183

Debt free wannabe and statement of affairs. Not really necessary as you are not struggling with debt. 

The majority of people on MSE will
tell you debt consolidation loans are bad but I disagree. It’s sometimes nice to have everything rolled up into one monthly payment with the option of overpaying if needs be. However, if the interest rates are still at 0% on CC’s then it’s not good to then switch that to a loan at say 3-4%. You should pay down these 0% credit cards and if interest does start to get added then consider a debt consolidation loan. 

Some on here think they are bad but it’s personal preference. As long as you borrow the same amount (and not add to the debt) and the loan rates are cheaper than the existing rates you’re paying then it’s a good option. 

Reference savings, you should really look into opting into your work place pension as it’s free money and you also get tax relief. It’s something you need to do a little bit of research on. For example, that £1300 you have saved, it’s likely come from your net salaries that has already been taxed. In a pension you would be able to save that £1300 into your fund but get 32% tax relief on it through salary sacrifice (20% if they don’t offer salary sacrifice) That means £1300 actually cost £884 net salary to save (£1300 x 0.68, if getting 32% relief). In addition to that, the employer contributes, many match your contribution so that £1300 you put in would double to £2600 and it’s only cost you the same £884 net. That £2600 is then invested in stocks and shares and can grow substantially on the stock markets. It beats you putting in £1300 and relying on very poor interest rates. However, of course with a pension that money is locked away until at least 57 before you can withdraw it. (Gives it a long time to grow). You should ask your employer what type of scheme they have and what their contribution would be. 

Saying that, it’s also nice to have accessible savings like you do now incase of emergencies. 

Good luck with everything. You don’t have much debt at all between the pair of you so I wouldn’t bother stressing out. 

weston800

CSL0183 said:

Debt free wannabe and statement of affairs. Not really necessary as you are not struggling with debt. 

The majority of people on MSE will
tell you debt consolidation loans are bad but I disagree. It’s sometimes nice to have everything rolled up into one monthly payment with the option of overpaying if needs be. However, if the interest rates are still at 0% on CC’s then it’s not good to then switch that to a loan at say 3-4%. You should pay down these 0% credit cards and if interest does start to get added then consider a debt consolidation loan. 

Some on here think they are bad but it’s personal preference. As long as you borrow the same amount (and not add to the debt) and the loan rates are cheaper than the existing rates you’re paying then it’s a good option. 

Reference savings, you should really look into opting into your work place pension as it’s free money and you also get tax relief. It’s something you need to do a little bit of research on. For example, that £1300 you have saved, it’s likely come from your net salaries that has already been taxed. In a pension you would be able to save that £1300 into your fund but get 32% tax relief on it through salary sacrifice (20% if they don’t offer salary sacrifice) That means £1300 actually cost £884 net salary to save (£1300 x 0.68, if getting 32% relief). In addition to that, the employer contributes, many match your contribution so that £1300 you put in would double to £2600 and it’s only cost you the same £884 net. That £2600 is then invested in stocks and shares and can grow substantially on the stock markets. It beats you putting in £1300 and relying on very poor interest rates. However, of course with a pension that money is locked away until at least 57 before you can withdraw it. (Gives it a long time to grow). You should ask your employer what type of scheme they have and what their contribution would be. 

Saying that, it’s also nice to have accessible savings like you do now incase of emergencies. 

Good luck with everything. You don’t have much debt at all between the pair of you so I wouldn’t bother stressing out. 

Thank you so much, reality appreciate your help :-)

macman

I'd second the comments on pensions. With savings interest rates at sub 1%, a workplace pension and a SIPP are by far the best way to save. Nothing else comes close because of the HMRC uplift. Also consider a LISA, as you are both under 39.