Paying off debt but needing new car

forestcub

Hi there,

ive recently posted in the loans section as looking for some advice. 

I’ve been paying off credit debt and have about £5000 (inc a £450 overdraft) and would like to be able to make this a bit more manageable (rather than a few payments a month) As it’s in a few areas I was wondering whether consolidating with a loan is a good idea to save transferring balances? 

I have no issues paying these bills as have steady income which is growing. 

Also I’m in need of a new car as have spent out a lot (basically half the cost and it’s old now) and need something a bit more reliable and comfortable to drive for longer journeys. Would car finance and paying off debt as I have been, be better? 

OR

would a loan for all I need at low interest be a better option. 

I’ve had mixed opinions from professionals and friends so hard to come to a decision which suits me. 

Any advice appreciated. Thank you  

fatbelly

The basic principle is that interest is a killer so you should either aim to buy things with cash or use 0% deals.

No loan is going to be 0% but credit cards might be, so if that is available to you, use it (I'm ignoring the fee here)

https://www.moneysavingexpert.com/credit-cards/best-0-credit-cards/

The overdraft is probably the most expensive way to borrow money and getting rid of it should be your priority

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

If you want to post a statement of affairs (link is to a calculator) that would help us - format for mse, copy and paste

forestcub

fatbelly said:

Thank you for sharing that, really helpful! 

Here is mine - 

[font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]

Household Information[/b]

Number of adults in household........... 2

Number of children in household......... 0

Number of cars owned.................... 1[b]

Monthly Income Details[/b]

Monthly income after tax................ 1400

Partners monthly income after tax....... 0

Benefits................................ 0

Other income............................ 300[b]

Total monthly income.................... 1700[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 0

Secured/HP loan repayments.............. 0

Rent.................................... 387.5

Management charge (leasehold property).. 0

Council tax............................. 76

Electricity............................. 25

Gas..................................... 0

Oil..................................... 0

Water rates............................. 14

Telephone (land line)................... 0

Mobile phone............................ 30

TV Licence.............................. 0

Satellite/Cable TV...................... 0

Internet Services....................... 13

Groceries etc. ......................... 120

Clothing................................ 0

Petrol/diesel........................... 100

Road tax................................ 14

Car Insurance........................... 28

Car maintenance (including MOT)......... 10

Car parking............................. 10

Other travel............................ 0

Childcare/nursery....................... 0

Other child related expenses............ 0

Medical (prescriptions, dentist etc).... 0

Pet insurance/vet bills................. 6

Buildings insurance..................... 0

Contents insurance...................... 5

Life assurance ......................... 0

Other insurance......................... 0

Presents (birthday, christmas etc)...... 0

Haircuts................................ 0

Entertainment........................... 0

Holiday................................. 0

Emergency fund.......................... 0[b]

Total monthly expenses.................. 838.5[/b]

[b]

Assets[/b]

Cash.................................... 0

House value (Gross)..................... 0

Shares and bonds........................ 0

Car(s).................................. 1800

Other assets............................ 0[b]

Total Assets............................ 1800[/b]

[b]

No Secured nor Hire Purchase Debts[/b]

[b]Unsecured Debts[/b]

Description....................Debt......Monthly...APR

Credit Card....................1098......28........23.9

Credit card ...................719.......22........24

Credit card ...................2300......35........0

Overdraft .....................450.......10........0

PayPal ........................680.......32........21[b]

Total unsecured debts..........5247......127.......-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 1,700

Expenses (including HP & secured debts). 838.5

Available for debt repayments........... 861.5

Monthly UNsecured debt repayments....... 127[b]

Amount left after debt repayments....... 734.5[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 1,800

Total HP & Secured debt................. -0

Total Unsecured debt.................... -5,247[b]

Net Assets.............................. -3,447[/b]

[i]Created using the SOA calculator at www.LemonFool.co.uk.

Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]

Jami74

  Amount left after debt repayments....... 734.5

Others will have lots of useful advice but I am sure the number one question will be, do you really have over £700 left after you've paid your bills and debts?

With regards to getting a loan, just be aware that it is very hard to get the advertised APR, especially if you are already carrying debt. Sometimes it looks 'on paper' like you can easily afford a loan payment, but when it comes to it in real life it's not the case. And be aware that while old cheap cars need lots of money spent on them, newer cars still need replacement tyres and oil changes etc.

forestcub

Yes I do. I’ve recently been putting the money towards setting up my own business and some courses (which is good as investing in myself as well as paying off my debts has generated new extra income, so my income grows constantly)

I think I’ll avoid the loan route by the sound of it. I’ve been managing my debt fine but just thought one payment would be easier and less hassle than transferring balances every so often. Sounds like it might be better to see what other options there are for a car upgrade (as I really do need one that is suitable for the long journeys I need it for) I’ve paid repairs fine but seems like I’m losing money and the cars value at the same time. Which I know happens, just any way to change this is a plus! 

Thanks for the help  

SusieT

If you do have that amount available each month, I would first set repayments at the nearest £x0 above the current amount so they are clearing a bit faster, then get rid of the overdraft in the first month as it can be recalled at any time. Then the 24% card and roll those payments into the next highest interest rate. After that save part of it for another bridging car that may not be the one you would ideally want, but it will be more comfortable and all yours, then you can carry on with the debt reduction and saving until you are in a position to get a nice car that will be paid in full from savings. 
There is also the point that you do not seem to have an emergency fund if anything were to need replacement - well worth getting one in place so that you do not need to use a card if something breaks.

TheAble

You could consider leasing a new car. For example you can get a Fiesta for around £150/month.

As another poster mentioned you definitely need to get some sort of emergency fund together though as a priority. Save you having to take on more debt when something comes up.

forestcub

Really appreciate these comments, thank you for your help everyone! 

I wasn’t great in the past at budgeting etc but much better now and have a healthier relationship with my money (obviously always making progress) so this is all really helpful  

forestcub

Also meant to say I have £250 in savings which I also use for emergencies