Taking out a plan to pay energy, good?

fangoose

I saw a post on the BBC website where a chap had taken out a 5k loan and was going to use it to pay energy bills this year. He said there was no way he could pay 400 a month for the family but the loan repayment was 80 a month 
Luckily, I don't need to do this (yet) bit I thought it sounded like a fair option if you are cash strapped and know you cannot meet bills this year. Especially as interest rates are still reasonably low at the moment.

Good idea? Sound planning?

badmemory

What happens next year, take out another plan?  If it was guaranteed that prices would come down or that your income was going to shoot up, but otherwise a very big risk.

northernstar007

and what about the following year, he will still have this years loan to pay

Merlin139

He will be paying £93 per month for 5 years. Total repayment. £5567

What does he do next year? Or the year after that if Energy costs have not fallen?

pochase

What happens in year 5 when he gets now further loans?

He will still be paying the £80 for year 1 to 4 = £320, plus whatever the cost in 4 years will be, say we are very lucky and it is 200. So he cannot afford £400, but will have to pay £520.

So the answer is a very stupid idea.

Brie

other than my mortgage I've never had a loan.  But I was under the impression that you needed to give some sort of reason for the loan or have I got that wrong.  I can't imagine anyone getting the ok for a loan to be paid back over, what?, 5 years?  With no more than "gimme some money".  If he's ok to get that how can he be unable to find the money for the energy bills some other way.  Credit card with a 0% BT might be one - but as another reply states "what happens next year?"

artyboy

Brie said:

other than my mortgage I've never had a loan.  But I was under the impression that you needed to give some sort of reason for the loan or have I got that wrong.  I can't imagine anyone getting the ok for a loan to be paid back over, what?, 5 years?  With no more than "gimme some money".  If he's ok to get that how can he be unable to find the money for the energy bills some other way.  Credit card with a 0% BT might be one - but as another reply states "what happens next year?"

Ditto to your first point, but I believe 'home improvement' is one of the more common options for a loan. And if keeping it warm in winter so you don't freeze doesn't count as an 'improvement', I'm not sure what does.

I'm not necessarily advocating this by the way as it does have the hallmarks of kicking a can down a road. But then if it's good enough as an approach for successive governments...

As someone that was very very closely tied up in the sub-prime mortgage crisis of 2008, I do wonder if we could end up with a sub-prime energy loan crisis in the years ahead... mass bankruptcies could be the order of the day.