Need advice on Loan and how to refinance….if possible.

libertine85

I bought a house 2 years ago and have extended it, as well as done a lot on the interior. I used savings to do this had “uh oh” money set aside. All seemed well. 

I ran into some structural issues so had to make a choice of using all my cash (only 70% through the build) leaving me very little money, or get a loan. I chose to do the loan, as I planned on clearing it with my savings once all work was completed…however, more issues popped up. I would have needed that loan anyway!

The loan is £15000 with 5 years left. 

I’ve looked at doing a money transfer card to pay it off, then pay the monthly £ that way, so I’m not paying interest. Problem is, I think I’ll only get £10700 (used the free eligibility calculators) and I don’t have the funds to pay the rest of the money owed at the moment. 

It’s like an episode of Grand Designs, with Kevin McCloud giving me that look! 

I have the monthly income to pay the loan bit by bit, I just hate paying the interest. I need some rich Aunty to turn up soon ha ha.

So….help!!! Any advice would be great. 

CliveOfIndia

libertine85 said:

I’ve looked at doing a money transfer card to pay it off, then pay the monthly £ that way, so I’m not paying interest. Problem is, I think I’ll only get £10700

I think you'd struggle to get a MT card for £15k - to be honest, I'm surprised that you've even been offered an indicated £10k.  In any case, the interest-free period on a card is usually relatively short (certainly nothing like 5 years).  If you couldn't repay the full amount when the promotional rate expires, you're then faced with paying an APR that would likely dwarf what you're being charged on the loan.

Potentially you could look at taking out another loan, hopefully at a lower rate, to repay the existing one.  The fly in the ointment is that a lender has no way of forcing you to use the new loan to repay the old one.  They therefore have to base their affordability calculations on the assumption that you're doubling your existing debt - which will very likely mean they either refuse the application, or else offer you a much higher APR.

Now, I'm very hesitant to suggest this, but there may be the option of a further advance on your mortgage.  Two very important things to bear in mind, though.  Firstly, although the APR will likely be lower, you'll be paying it off over a longer time period, so you need to do the calculations to see if you'd actually save anything.  If you did go down this route, you want to aim to be paying the extra amount over, say, 5 years - rather than adding it to the full mortgage term.

But far more importantly, bear in mind what happens if you find yourself unable to maintain the repayments.  Default on an unsecured loan, that's your credit file trashed for 6 years - not good, but not the end of the world in the grand scheme of things.  Default on your mortgage, and you could find yourself sleeping in a cardboard box on the canal towpath.

libertine85 said:

I have the monthly income to pay the loan bit by bit, I just hate paying the interest.

All things considered, I think just chipping away at the loan is going to be the most realistic option - as long as you're able to maintain your contractual monthly payments.  It may be worth heading over to the Debt-Free Wannabe board and posting an SOA to see if there's any wiggle-room in your budget.  Every pound you can save is another pound you can throw at the loan, ultimately reducing the amount of interest you'll pay overall.