Reducing Interest

Smurray2

Hi there, just wondered if anyone has any advice to cut down loan interest owed? My partner has a big loan of around £11,000 with 4 years remaining. Pays just under £350 per month, with interest nearly £100 too as the rate is high. I wondered if it is possible to reduce this at all. It is a loan through her current Bank. Previously had credit cards, small loan and overdraft all of which are now cleared so just this large loan. Any advice appreciated. Thanks, Shannon

Ebe_Scrooge

Making overpayments is the simplest method.  Just check that there are no penalties for doing so.

Of course, you could look at taking out another loan at a lower rate, then use that to pay off the existing loan.  Problem is, when you apply for a new loan, they'll work on the basis that you'll have the new one in addition to your existing one (they can't guarantee you'll use the new one to pay the old one off), so you may find you struggle to get a new one at a decent rate.

Smurray2

Hi there, thanks for replying. I dont think we are in a position to be paying overpayments at the moment just with current expense. The other loan would be a good idea but due to a poorer credit score than me I doubt that another loan would be approved due to this.

Ebe_Scrooge

Your score is not a factor in lending - it's neither used nor even seen by any lender.  But by the sounds of it, affordability probably would be a blocker - as I said, any lender would have to assume that a new loan is in addition to any existing loans.

It might be worth popping over to the Debt Free Wannabe board, posting up a Statement of Affairs and seeing if there's room to make savings in your outgoings.  Any spare cash you're able to throw at the loan will have a fair impact on its overall cost.

[Deleted User]

If you were able to pay off the cards, loan, and overdraft did you do that with this loan i.e. a consolidation or was it on top?

If it was on top and you were able to clear those, then use the money you were using to clear those to push the loan.

There is no other way of reducing the payments other than another (cheaper) loan or overpayments

Smurray2

Hi there, it isnt my loan, it is my partners. The cards etc was on top. I helped clear these cards and we are in a different financial position now as have just moved into a new house so not as much spare money as we had before as rent was cheaper due to it being a smaller house, hence being able to clear these other things first.

macman

Might have been better to opt for a cheaper house purchase then. When you took on the mortgage you must have known that your outgoings would increase vs renting. There is no magic way to decrease the APR, it's whatever your partner contracted to. Unless you can borrow yourself (with your better credit history), lend/give yo your partner to clear her debt early?
However, having presumably just jointly taken on a big mortgage debt, you may not be able to borrow that much.

Smurray2

No, my outgoings has increased, my partners hasnt, it has remained the same. She was paying all bills herself as a single parent, however now that is split, it remains the same as I previously lived with parents. Even though the house is more it still balances out the same. Her earnings has suffered some losses this year due to covid. Of course we knew the increase in outgoings from my side however what i am saying is those cards etc were cleared with money that was spare at a different point a while ago, and was the only option to be able to get a mortgage. Unfortunately nobody can magic up £10k after buying a house. We have saved for a long time for a house and due to the area we live in a cheaper house wasnt on the cards. Paying extra payments would be worthwhile as someone mentioned before but was unsure of any other options. Already checked my options for a loan and wont be able to get one to clear the whole lot. Thanks for the advice though.

sourcrates

Smurray2 said:

Hi there, just wondered if anyone has any advice to cut down loan interest owed? My partner has a big loan of around £11,000 with 4 years remaining. Pays just under £350 per month, with interest nearly £100 too as the rate is high. I wondered if it is possible to reduce this at all. It is a loan through her current Bank. Previously had credit cards, small loan and overdraft all of which are now cleared so just this large loan. Any advice appreciated. Thanks, Shannon

As you have discovered, consolidation can be a double edged sword.

So many people go down this path then realise what a catastrophe it has been for them with high rates of interest etc.

Basically you cannot borrow your way out of debt, for example, if your partner had opted for debt management instead, in most cases interest is frozen, and you repay the debt at an affordable rate over time, interest free.

Think of all the interest that would have saved you.

Yes this would affect your credit file, but then so would defaulting on this loan if it became unaffordable.

Unfortunately your stuck with the loan now, however if the payments get too much, you can always make arrangements with creditors, if you need to.