Is a personal loan the way to go?

DachshundDad

Hi everyone,

Just looking for opinions on this one.

So the situation is that I have a total debt of about £15,500 (exc mortgage).

This breaks down as follows:
Overdraft: £3k (£45 pm) 15% interest with starling.
PCP car loan: £8,270 (settlement quote) 227pm
Very: 188 (13.67pm)
Finance agreement 395 (settlement quote) £32pm
CC1: £3,479 (90pm) currently on 0% interest
CC2: £216.57 

I've recently given myself a bit of a shake and I'm actively trying to be more sensible financially. I've cut out lots of direct debits. Stopped smoking and drinking redbull (yes, I'm now a grump) and limited other frivolous spending. 

I'm lucky enough to be in a job that has a credit union which is offering a 7.1% guaranteed loan for over £10k.

I am seriously considering taking out a loan for £15,500 over 5 years and just clearing the lot. I've done some sums and believe the loan will cost me about £316.19 a month at worse. This will probably be less as the loan would be taking directly from my salary before tax.

This would save me just under £100 a month but would cost me around £2,800 overall by the time I paid the loan back. 

I'm hesitant because I've already started making in roads into the overdraft and I could clear the smaller amounts fairly quickly.

Any thoughts or advice would be appreciated.

Thanks

sourcrates

Hi, apologies to start with, as this ain`t going to be pretty.

This is a story we hear on these boards time and time again, gets into debt, gives oneself a shake, and immediately thinks borrowing more money is the answer to all your problems.

Sorry to be harsh, but that`s not how you deal with debt, if you want to be forever consolidating those debts for the next 20 years, getting deeper and deeper into the hole, then take the loan, you will keep coming back to those cards when things are a little stretched, and sure as night follows day, the debts will soon be racked up again, but now twice as much as before.

If however you are serious about change, look at cutting back on excessive spending, try debt management if its appropriate, try anything, just don`t borrow more money as its never the right answer.

agentblackcat

Hi. 

Sourcrates has good advice here. I have found myself previously doing exactly that, taking out loans to repay other debts. For me it didn't work and now I have realised that and regret consolidating hugely. 

My advice would be although very limited as a newbie, do a statement of affairs. This will allow you to plan a budget. I'm assuming you are up to date and not behind on any payments. As long as you can make your minimum payments I would start working 1 by 1 through the debts throwing any extra you have at them...even if its a spare 5.00 a month etc...debt snowball effect. Do you have a emergency fund? 

fatbelly

I don't think taking out more debt is going to be the answer to your debt problem

The ccjs are already attracting no interest
The car hp has an option under the consumer credit act to voluntarily terminate and limit your liability to 50%
The cards can be balance transferred to 0%

Give us a soa and we'll help you to formulate a strategy

ManyWays

Has your mortgage recently gone up, if not when does your current fix end and who is the mortgage lender?

When does the PCP end and how large will the balloon payment be? 

When does CC1 0% end?

DachshundDad

Thanks to all of you.

Just to clarify a couple of things.

I don't have any ccjs. When I said cc I meant credit cards. 

I'm having no issues with keeping up with the payments and I'm able to save around £400 a month (technically not savings as they're in a savings space on Starling which means that positively counts towards what I'm being charged on my overdraft.

I'm due 2 separate pay rises as of October, one of which will come with a decent pump sum (probably around £600-700 which will improve my position further).

When you say statement of affairs, what's that exactly? I'm assuming that's what the sof Fatbelly mentioned.

I realize I'm in a much better place than many on here.

I'm already thinking a loan isn't the way to go.

Should I work on my overdraft draft first (putting everything extra I get into that)? Or should I take care of the smaller figures first?

Again, please let me reiterate my sincere thanks for everyone's input. 

Harry84

DachshundDad said:

Thanks to all of you.

Just to clarify a couple of things.

I don't have any ccjs. When I said cc I meant credit cards. 

I'm having no issues with keeping up with the payments and I'm able to save around £400 a month (technically not savings as they're in a savings space on Starling which means that positively counts towards what I'm being charged on my overdraft.

I'm due 2 separate pay rises as of October, one of which will come with a decent pump sum (probably around £600-700 which will improve my position further).

When you say statement of affairs, what's that exactly? I'm assuming that's what the sof Fatbelly mentioned.

I realize I'm in a much better place than many on here.

I'm already thinking a loan isn't the way to go.

Should I work on my overdraft draft first (putting everything extra I get into that)? Or should I take care of the smaller figures first?

Again, please let me reiterate my sincere thanks for everyone's input. 

I agree with the replies you have had so far: stop borrowing while you only owe £15k. In my personal experience, as referenced by others, consolidation simply doubles your debt. You need to learn to live without borrowing money. Make sure you have a pot of savings so that you don't have to borrow money for a new tyre, an expensive car service etc. 

I'd snowball it - get rid of the smallest thing first, once that has cleared, use the repayment amount on the next biggest, and so on. That worked for me, but other more experienced posters may have better ideas. 

You can do it, and you've got pay rises coming, so you'll be able to speed it up, you can clear this! Watch the number going down every month until it gets to £0, then enjoy saving. 

DachshundDad

ManyWays said:

Has your mortgage recently gone up, if not when does your current fix end and who is the mortgage lender?

When does the PCP end and how large will the balloon payment be? 

When does CC1 0% end?

No mortgage hasn't gone up yet, end of the fix comes in June, currently paying £730 but obviously that's gonna go up a fair bit but it is split between two. Mortgage currently with RBS.Harry84 said:

DachshundDad said:

Thanks to all of you.

Just to clarify a couple of things.

I don't have any ccjs. When I said cc I meant credit cards. 

I'm having no issues with keeping up with the payments and I'm able to save around £400 a month (technically not savings as they're in a savings space on Starling which means that positively counts towards what I'm being charged on my overdraft.

I'm due 2 separate pay rises as of October, one of which will come with a decent pump sum (probably around £600-700 which will improve my position further).

When you say statement of affairs, what's that exactly? I'm assuming that's what the sof Fatbelly mentioned.

I realize I'm in a much better place than many on here.

I'm already thinking a loan isn't the way to go.

Should I work on my overdraft draft first (putting everything extra I get into that)? Or should I take care of the smaller figures first?

Again, please let me reiterate my sincere thanks for everyone's input. 

I agree with the replies you have had so far: stop borrowing while you only owe £15k. In my personal experience, as referenced by others, consolidation simply doubles your debt. You need to learn to live without borrowing money. Make sure you have a pot of savings so that you don't have to borrow money for a new tyre, an expensive car service etc. 

I'd snowball it - get rid of the smallest thing first, once that has cleared, use the repayment amount on the next biggest, and so on. That worked for me, but other more experienced posters may have better ideas. 

You can do it, and you've got pay rises coming, so you'll be able to speed it up, you can clear this! Watch the number going down every month until it gets to £0, then enjoy saving. 

Thank you for your suggestions. I'm seeing the logic in paying off the smaller ones first. I tend to get hung up on the overdraft as I've been in it for so long (pretty much most of my life and I'm 40!!). 

Thank you for the kind words as well.
The PCP agreement has another 3 and half years roughly. The balloon payment was around £2,500 - £3000 (I won't be keeping the car either way).

The 0% ends in a year, it was 18 months interest free purchases.

sourcrates

Best way to get rid of an overdraft is to move your banking to a new basic bank account, with no borrowing facility, then repay what you can afford to the OD on a monthly basis, ask the bank to suspend or stop interest if it helps you.

Then learn to live within your means, and not rely on the banks money to get bye.

ManyWays

"No mortgage hasn't gone up yet, end of the fix comes in June, currently paying £730 but obviously that's gonna go up a fair bit but it is split between two. "

That is the key date to work towards. You want as much as possible of the other debts except the PCP cleared off by then. Very and CC2 look easy for you to knock off. CC1 needs to be gone by then. and the overdraft well down. 

DachshundDad

sourcrates said:

Best way to get rid of an overdraft is to move your banking to a new basic bank account, with no borrowing facility, then repay what you can afford to the OD on a monthly basis, ask the bank to suspend or stop interest if it helps you.

Then learn to live within your means, and not rely on the banks money to get bye.

I have been looking at potentially moving to tsb for the switching deal, so I'll look into that some more.ManyWays said:

"No mortgage hasn't gone up yet, end of the fix comes in June, currently paying £730 but obviously that's gonna go up a fair bit but it is split between two. "

That is the key date to work towards. You want as much as possible of the other debts except the PCP cleared off by then. Very and CC2 look easy for you to knock off. CC1 needs to be gone by then. and the overdraft well down. 

Putting a date on it is a good idea. I could possibly get rid of 3 of the debts within the next month.