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Loan advice please

Morning all,

Bit of advice is possible please.

I currently have two loans paying £638 a month. A lot but i can afford to pay it, i'm not struggling

One @ £326 a month that runs until October 2023 @ around 12% APR

One @ £312 a month that runs until 2026 @ around 9% APR

I was looking to reduce the cost and can get a new loan (approved @2.9%) for £385 a month with allows to me pay off both of the above.

It would say me around £250 a month.

It is better to do this or just wait until the first loan is paid next year and save the £326?

Thanks in advance

Comments

  • How long is the 'new' loan for?
  • MallyGirl
    MallyGirl Posts: 7,089 Senior Ambassador
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    If your income is sufficient to support the extra borrowing - they will assume it is additional rather than to pay off the others - and your credit history makes you attractive to someone offering 2.9% then it will save you money. Only if you actually do use the new loan to pay off the old ones though - do you trust yourself to do that?
    I’m a Senior Forum Ambassador and I support the Forum Team on the Pensions, Annuities & Retirement Planning, Loans
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  • How long is the 'new' loan for?
    ends 2026
  • If you do it now, you'll save more on interest.

    But you should reduce the term of the new loan and bring the monthly payment back to what you're currently paying, as that is manageable, otherwise you're going to throw a lot of the savings away again.


  • If you do it now, you'll save more on interest.

    But you should reduce the term of the new loan and bring the monthly payment back to what you're currently paying, as that is manageable, otherwise you're going to throw a lot of the savings away again.


    That's something i hadn't thought of. Thank you
  • Ebe_Scrooge
    Ebe_Scrooge Posts: 7,320 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    edited 16 February 2022 at 11:23AM

    I was looking to reduce the cost and can get a new loan (approved @2.9%) for £385 a month with allows to me pay off both of the above.
    In addition to the good advice already given by others - have you actually, definitely, been approved for a loan at 2.9%?  You need to remember that the advertised "representative" APR is not given to all applicants - it's only after you've made the application and they've churned your data through their computers that they'll decide what rate to offer you.

  • Simply put, lenders consider your 2 debts and add on the third debt as a new debt, in addition, as they cannot force you to spend the new money on the old, you could just as easily put it on some nag at the 3:30 at Chepstow or spunk it on whatever bitcoin Elon Musk is raving about currently. Thus their affordability is based on whether you can maintain all 3 debts at once, if not, then they either won't lend or give you some higher rate. If you can afford the debt and maybe over pay (if there are no penalties) you might do better doing that
  • MEM62
    MEM62 Posts: 5,112 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    One @ £326 a month that runs until October 2023 @ around 12% APR

    One @ £312 a month that runs until 2026 @ around 9% APR

    I was looking to reduce the cost and can get a new loan (approved @2.9%) for £385 a month with allows to me pay off both of the above.
    As you two previous loans were offered at 12% and +9%, the chances of you now securing a loan at 2.9% are slim.  It is probably worth trying as, if you are offered a higher rate, you do not have to take it.   
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