Personal loan query

KALMH

Hi all

I want to take out a personal loan to pay off my car but I also want to cover a some of a credit card balance. Because the loan covers multiple items, is there anything I need to consider? When looking at rates I can only select one reason. Would I need to let the lender know that it covers multiple items?

CliveOfIndia

The most honest reply would be to state the purpose as "loan consolidation", which is effectively what you're doing.

There's a couple of things to bear in mind though.  Firstly, affordability.  The lender cannot force you to use the loan to pay off your existing debts, you could actually use it for any purpose, irrespective of what you put on the application form.  For that reason, the lender has to take the view that the loan will be in addition to, not instead of, your existing debt.  This will be factored into their affordability calculations, and will affect how much and at what rate they're prepared to lend to you.

Consolidation loans are very often not a good idea.  Particularly with using them to pay off credit cards, it's very easy to get the loan, pay off the cards, then merrily go out spending on the cards again, meaning you're soon saddled with twice the debt you started with.

I'm not saying they can never work - but you need to be very disciplined, and in particular you need to address the underlying cause of the existing debt.

Do take care to do your sums properly, as well.  You may find that, due to affordability, the rate you're offered is actually higher than what you're already paying.  Also factor in any early settlement fees that may apply to your existing car finance.

fatbelly

Have you considered a 0% balance transfer card for the credit card debt?

Brie

And a money transfer 0% card for the car finance?