Am I Doing Right Thing?

blossoms

Firstly, apologies if I'm in wrong Forum - wasn't sure, if not please point me in right direction. I have recently taken voluntary redundancy and with my lump sum, I kept a small amount and put the rest into a Term Deposit account with my bank (can't touch it for a year without incurring a charge). I'm struggling each month with the debts I have (keep going into overdraft) and have asked my bank for a personal loan to pay off these debts. I already have another personal loan and of course the mortgage and the usual monthly direct debits. I am also starting up a small business working from home and am using the very small amount of my savings I still have to help me get started. Am I making a mistake taking on another personal loan? Should I take my savings out of the Term Deposit account (incurring the charge) to pay off my debts and would leave me some money to help with my small business?

peter365

I think it is a case of weighing up the costWould the interest and payments on a loan work out more or less than what you would lose if you surrendered your investment to release the funds you need, also would you have enough left to reinvest? I'm not a financial expert, but have in the past been caught in the spiral of borrowing to clear other debts, and for what it's worth it has never worked for me.Good luck!

Primrose

It doesn't really seem sensible to have money on deposit when you are running into debt or overdraft every month as this is only going to impact on your credit record in due course. You don't say how much the charge would be to take your savings out of deposit, but borrowing more money doesn't seem like a wise solution in your current financial circumstances. Your action will also depend on how comfortable you feel generally being in debt whilst unemployed. and having little or no income. You may find that taking out another loan will push you into a debt spiral from which you cannot easily extricate yourself. Until you can get your new business established it's probably wise not to increase your debts any further but to keep yourself out of further debt.

NAR

Blossom the question to answer is:- is the interest rate on the deposit higher than the rate you will be charged on a loan. That should help you decide what to do.