2 loans advice

Helloadviceplz

Hello, I have two personal loans 1. MBNA 10K four 4 years - I pay £219 per month. 2. M&S 20k for 4 years I pay £447 per month. 

I hear consolidation loans arent always the best option. But any recommendations in general here? I would like to reduce loan term and monthly amount if possible. However, priority would be loan term reduction. 

I am just about managing to pay these repayments and able to still save a small amount each month. After any advice please. 

Thanks

Clive_Woody

Reducing monthly amount and the term is unlikely unless you can get a new loan at a much lower APR, which given the level of borrowing £30k would be unlikely unless you have a very high salary. What are the APRs on your current loans?

Normally to reduce the term you would need to increase the monthly payments (over payments). To reduce the monthly payments you would need to extend the duration of repayments.

If your priority is to reduce the loan term, then throw every spare penny at reducing the outstanding balance.

Nasqueron

Consolidation is risk based on the assumption you will not spend the new loan clearing the old ones, as there is no way to force you to do it, so your income would have to support 2x 30k debts. Unless you get a much better APR then there is no point - just pay as much as you can over the monthly payment to clear it 

Also if you have interest bearing debt and savings, you don't have savings, you are losing money 

Helloadviceplz

Thanks @Nasqueron that is a very good point! When I say savings.. I mean an emergency fund atm! And you are right I should just throw what I can at them both. I will check the APR's. I am 'pre approved' for a 20k loan for 3 years which would pay off the M&S loan with similar monthly payment but for 3 years not 4, which is why I thought this would be a good idea, what do you think?

th081

Helloadviceplz said:

Thanks @Nasqueron that is a very good point! When I say savings.. I mean an emergency fund atm! And you are right I should just throw what I can at them both. I will check the APR's. I am 'pre approved' for a 20k loan for 3 years which would pay off the M&S loan with similar monthly payment but for 3 years not 4, which is why I thought this would be a good idea, what do you think?

Unless your salary is very high the pre-approval may well disappear once you apply. Worth trying though if not you are meeting the requirements I would suck it up for 4 years and pay them off

Caz3121

Helloadviceplz said:

 I am 'pre approved' for a 20k loan for 3 years which would pay off the M&S loan with similar monthly payment but for 3 years not 4, which is why I thought this would be a good idea, what do you think?

Paying back £20k over 3 years with no interest added would be £555 per month. The M&S site show a representative figure of £617 per month (no guarantee you would get that rate) so at least an increase of £170 per month

Helloadviceplz

Ok thank you. I pay £447 per month to the M&S loan currently. It seems my best option is to just carry on with the payments and throw any additional payments I can towards both. Unless anyone has any other ideas about swapping deals to reduce interest/ term? Thank you 

DullGreyGuy

Nasqueron said:

Consolidation is risk based on the assumption you will not spend the new loan clearing the old ones, as there is no way to force you to do it, so your income would have to support 2x 30k debts. Unless you get a much better APR then there is no point - just pay as much as you can over the monthly payment to clear it 

From a lenders perspective, though suspect most here dont really consider the risks of being a lender and the anti-consolidation is more from the borrower side. 

When we are talking normal loans there isnt much reason not to, unless you are thinking of converting unsecured loans into secured borrowing, though several things will have had to happen for it to actually reduce the payments and time. 

Where people on here give heavy warnings is when people are wanting to convert maxed out credit cards to loans. Payment reduction is much easier here because the high APRs on CCs but once its cleared there is the temptation to start spending on it again, which doesnt work the same for a standard loan, and so again we see people paying off their debt consolidation loan and near to maxing out their cards again. 

R_P_W

In short no it likely isn't a good idea, consolidation rarely is as a lot of people just build up more debts.

You haven't said what your loan APRs are which is the most important info and when you actually took out the loans.  It's highly unlikely that you are going to be able to secure further lending at those amounts and even if you could highly unlikely any APR on offer is going to be an improvement.

To reduce your loan terms you are going to have to pay more per month, but you say you are just about managing to pay them now.

Nasqueron

DullGreyGuy said:

Nasqueron said:

Consolidation is risk based on the assumption you will not spend the new loan clearing the old ones, as there is no way to force you to do it, so your income would have to support 2x 30k debts. Unless you get a much better APR then there is no point - just pay as much as you can over the monthly payment to clear it 

From a lenders perspective, though suspect most here dont really consider the risks of being a lender and the anti-consolidation is more from the borrower side. 

When we are talking normal loans there isnt much reason not to, unless you are thinking of converting unsecured loans into secured borrowing, though several things will have had to happen for it to actually reduce the payments and time. 

Where people on here give heavy warnings is when people are wanting to convert maxed out credit cards to loans. Payment reduction is much easier here because the high APRs on CCs but once its cleared there is the temptation to start spending on it again, which doesnt work the same for a standard loan, and so again we see people paying off their debt consolidation loan and near to maxing out their cards again. 

That is precisely why I said that unless there is a much better APR then there is no point.

Even loan to pay loan, reduces monthly payments maybe but then people being people, use the "spare" money for other things and it doesn't solve very much