Loan to consolidate debts?

Lisa1978

Hi all, looking some advice regarding my debt which stands at £13k spread over 4 CCs.  I am in a position were are the cards all 0% interest therefore i'm undecided whether to take out a loan which will have a fee attached or keep plugging away at the CCs. 

My son has finished childcare this month (hooray after 9 years of paying a large chunk) so i will be saving £400 a month for that and a loan i have at £215 finishes end of this month.  i will therefore have an additional £615 a month.  

Mentally i would like to have all cards paid off with the loan and just have the one bill but at the same time i'm thinking i would be taking on more debt taking out a loan. 

Advice thanks! 

Tucosalamanca

Two sensible choices.
1. Use the additional £615pm to quickly pay down credit cards, this will require some discipline.
2. Take a 3yr loan at 3.2% (Tesco), pay off all cards (and maybe cancel them?), know exactly when you'll be debt free and have a few quid spare each month. Repayments of £379 each month and a total interest charge of £642.

Personally, I'd go option 2. Yes it will cost more, but you have a fixed schedule and know exactly when you'll be debt free.
With option 1, you might not be so committed every month and I think the debts would have a tendency to just drift on.

Good luck with it!

Ebe_Scrooge

Firstly, it doesn't make financial sense to turn an interest-free debt into an interest-bearing debt - why would you voluntarily pay more interest than you need to?

Secondly, even if you did decide you want a loan, remember that a lender will make their affordability assessment based upon the new loan being in addition to, not instead of, your existing debt - they have no way of guaranteeing that you would in fact use the loan to repay the cards.  So they'll assess whether they think you can afford a £26K debt, and make their decision based upon that figure.

Tucosalamanca said:

2. Take a 3yr loan at 3.2% (Tesco)

What makes you think Tesco will give the OP a loan at 3.2%?  That may well be the advertised "representative" rate, which is given to 51% of successful applicants.  But each application will be assessed based upon the applicant's individual circumstances and credit history, so the OP may well find their application refused, or accepted but at a much higher APR.

Option 1 is by far the more sensible approach - throw every spare penny at the debts, even if that means going without some discretionary spend for a while, and get them paid off before the 0% deal expires.

fatbelly

Lisa1978 said:

Hi all, looking some advice regarding my debt which stands at £13k spread over 4 CCs.  I am in a position were are the cards all 0% interest therefore i'm undecided whether to take out a loan which will have a fee attached or keep plugging away at the CCs. 

My son has finished childcare this month (hooray after 9 years of paying a large chunk) so i will be saving £400 a month for that and a loan i have at £215 finishes end of this month.  i will therefore have an additional £615 a month.  

Mentally i would like to have all cards paid off with the loan and just have the one bill but at the same time i'm thinking i would be taking on more debt taking out a loan. 

Advice thanks! 

You're still a 'player' as far as credit card deals go. Keep the debt at 0% using new cards if necessary and throw as much as you can at them.

The loan route makes no sense for you.

TheMilkmansDad

How much is on each card and when does the 0% end for each. I'd focus on clearing the one that finishes the earliest first so overpay on that one (ensuring minimum payments are made on the others).

A loan makes no sense at this time.

Mimi_Arc_en_ciel

I think it seems silly paying interest on a loan when the cards are 0%. 

I'd look at snowballing the debts instead 

Lisa1978

TheMilkmansDad said:

How much is on each card and when does the 0% end for each. I'd focus on clearing the one that finishes the earliest first so overpay on that one (ensuring minimum payments are made on the others).

A loan makes no sense at this time.

MBNA Card 1 = £1600 to January - Will be cleared;  £1000 to August - will be cleared 
MBNA Card 2 = £1500 to March will be cleared;  £3200 - to Aug 23 (may need to do a transfer at a later date) 
HSBC = £3500 to Dec 23 - Will be cleared 
Halifax = £2000 - this is the only one that i spend on and I forgot there will be interest this month.  Previously i had it down to £300 but this month i put a lot onto the card between booking hubbies 40th birthday holiday/concerts/hen do etc.  Yip i know, my bad but didnt' want to use my emergency fund for it. 

Ebe_Scrooge

Lisa1978 said:

TheMilkmansDad said:

How much is on each card and when does the 0% end for each. I'd focus on clearing the one that finishes the earliest first so overpay on that one (ensuring minimum payments are made on the others).

A loan makes no sense at this time.

MBNA Card 1 = £1600 to January - Will be cleared;  £1000 to August - will be cleared 
MBNA Card 2 = £1500 to March will be cleared;  £3200 - to Aug 23 (may need to do a transfer at a later date) 
HSBC = £3500 to Dec 23 - Will be cleared 
Halifax = £2000 - this is the only one that i spend on and I forgot there will be interest this month.  Previously i had it down to £300 but this month i put a lot onto the card between booking hubbies 40th birthday holiday/concerts/hen do etc.  Yip i know, my bad but didnt' want to use my emergency fund for it. 

Whilst having an emergency fund is eminently sensible, it would make more sense to use that money to repay in full any of the interest-bearing debts.  Then rebuild it by making monthly payments back to your savings, equivalent to what you would otherwise have to be paying to the debt.  If you should need access to emergency money in the meantime, just use a card - you'll be no worse off.  If you don't need the money then you're quids-in overall, due to the interest you'll have saved.

SusieT

With those numbers there is no point getting a loan, especially as mentiones above, they will assess you as having the cards unpaid as well. Far better to overpay all the cards by a few £ so that will show on the credit report, pay off the interest free amounts in the order that they finish, roll the payment onto the next card, and then apply for another interest free card next year when you get to the end on these. By that time you will be at a much lower amount and should be in a good position to pay no interest on any of them. At the rate you will be paying them you could be deby free in a relatively short time.