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To loan or not to loan!

JK25
JK25 Posts: 4 Newbie
First Post
I am the world's worst saver and I need to repay a friend some money, plus have a wedding and home improvements to do.  I would never take out a loan that was unnecessary or unaffordable but If I look at taking a loan out (over 5 years) to just repay my friend the rates available to me are 18%apr and more but if I look at taking a higher loan over 7 years it drops to between 8/10%apr! 
Why is that? 
I have also worked hard to get my credit rating back up to excellent and yet I still get rubbish rates! 
Any advice would be greatly received.
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Comments

  • Nebulous2
    Nebulous2 Posts: 5,501 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    These are high rates.

    Give us a clue on amount and how that relates to income. Is this a personal loan?

    Under £7500 on a personal loan is usually more expensive. Rates are cheaper at £7500 to £15k. 
  • Sandtree
    Sandtree Posts: 10,628 Forumite
    10,000 Posts Fourth Anniversary Name Dropper
    The high rates you've been quoted are quite likely to be because you're looking to borrow (or already owe) a high sum in relation to your income. 
    I'm not sure that comment helps the OP to understand if they borrow more why they get a lower rate as clearly a higher loan is going to be a higher percentage of their income.


  • NewLeaf1986
    NewLeaf1986 Posts: 168 Forumite
    100 Posts Second Anniversary Name Dropper
    edited 18 May 2021 am31 10:21AM
    JK25 said:
    I am the world's worst saver and I need to repay a friend some money, plus have a wedding and home improvements to do.  I would never take out a loan that was unnecessary or unaffordable but If I look at taking a loan out (over 5 years) to just repay my friend the rates available to me are 18%apr and more but if I look at taking a higher loan over 7 years it drops to between 8/10%apr! 
    Why is that? 
    I have also worked hard to get my credit rating back up to excellent and yet I still get rubbish rates! 
    Any advice would be greatly received.
    You need to break this cycle my friend.

    Don't take out a loan.
    Don't take out a credit card.
    Repay your friend what you can reasonably afford to out of your benefits / wages / salary each time you are paid until you have cleared your debt to them.
    Then start saving for your wedding. Plan your budget. Plan your wedding realistically.
    If you want more money, earn more.
    Take a second job, do evening classes to increase your worth and apply for better jobs, whatever it takes. 
  • Grumpy_chap
    Grumpy_chap Posts: 17,036 Forumite
    Tenth Anniversary 10,000 Posts Name Dropper Combo Breaker
    The OP is considering borrowing to pay for their wedding plus improvements to, presumably, the intended marital home.  This type of finance discussion would be better with the OP's intended betrothed than a group of internet strangers.  Starting out married life with ghosts hidden in the financial closet does not bode well.
  • enthusiasticsaver
    enthusiasticsaver Posts: 15,905 Ambassador
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    JK25 said:
    I am the world's worst saver and I need to repay a friend some money, plus have a wedding and home improvements to do.  I would never take out a loan that was unnecessary or unaffordable but If I look at taking a loan out (over 5 years) to just repay my friend the rates available to me are 18%apr and more but if I look at taking a higher loan over 7 years it drops to between 8/10%apr! 
    Why is that? 
    I have also worked hard to get my credit rating back up to excellent and yet I still get rubbish rates! 
    Any advice would be greatly received.
    If you already struggle to save and have taken a while to repay your friend then you need to totally rethink your attitude to finances and prioritise your expenditure. Borrowing that amount of money is not advisable. Talk to your partner and set up a savings plan for the wedding, repay your friend then save for home improvements. You will thank yourself in the long run rather than being saddled with a large monthly repayment on a high interest loan. 
    I’m a Forum Ambassador and I support the Forum Team on the Debt free Wannabe, Budgeting and Banking and Savings and Investment boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.
  • FaceHead
    FaceHead Posts: 737 Forumite
    500 Posts Second Anniversary Name Dropper
    The OP may not come back to this thread because some of the comments are absolutely brutal. They are, however, both true and probably well meaning. 

    OP - you can usually (check the T's & C's) pay a loan back faster, so if borrowing more (e.g. over the 7.5k threshold mentioned) for more time gets a lower rate, do that and then pay it back, rather than suffering a higher interest rate. However, not borrowing will see you pay even less interest.   There are also 0% credit cards, which if used well can be a good option. 


  • NewLeaf1986
    NewLeaf1986 Posts: 168 Forumite
    100 Posts Second Anniversary Name Dropper
    edited 18 May 2021 pm31 1:51PM
    FaceHead said:
    The OP may not come back to this thread because some of the comments are absolutely brutal. They are, however, both true and probably well meaning. 

    OP - you can usually (check the T's & C's) pay a loan back faster, so if borrowing more (e.g. over the 7.5k threshold mentioned) for more time gets a lower rate, do that and then pay it back, rather than suffering a higher interest rate. However, not borrowing will see you pay even less interest.   There are also 0% credit cards, which if used well can be a good option. 


    OK, point taken. I'll happily offer a different tack:

    OP - have you looked at an MBNA credit card? These provide 0% money transfers into your current account. They'll tell you how much they're willing to lend at pre-application stage on their website. This is the kind of card FaceHead is referring to. 
  • JK25
    JK25 Posts: 4 Newbie
    First Post
    FaceHead said:
    The OP may not come back to this thread because some of the comments are absolutely brutal. They are, however, both true and probably well meaning. 

    OP - you can usually (check the T's & C's) pay a loan back faster, so if borrowing more (e.g. over the 7.5k threshold mentioned) for more time gets a lower rate, do that and then pay it back, rather than suffering a higher interest rate. However, not borrowing will see you pay even less interest.   There are also 0% credit cards, which if used well can be a good option. 


    You're right, some of the comments are a bit harsh but true, hence the dilemma and we don't all have the luxury of time to save for everything (which is why people get mortgages on properties and pcp on cars) Thank you for your advice, I have looked at all options, I will think long and hard on what to do. 
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