Need help with a decision
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sunflowerlady
Posts: 77 Forumite
Hi all,
I can’t figure out which is the best route to take here.
Trying to consolidate some debt and have applied for a loan but it’s been accepted at a higher interest rate than we applied for.
Currently we have 3 cards that are a mix of 0% for different set periods and others are charging monthly interest. As of this month the three cards are costing us £505 per month on a combined balance of £19k. The loan would be £455 per month for £20k over 60 months.
If we carried on paying £505 to the 3 cards then we would have them cleared in 37months or less (as the interest comes down), but would also have the hassle of finding another 0% deal which might not happen.
I’m really unsure whether to accept the loan or not.
What would people advise?
Thank you in advance!
I can’t figure out which is the best route to take here.
Trying to consolidate some debt and have applied for a loan but it’s been accepted at a higher interest rate than we applied for.
Currently we have 3 cards that are a mix of 0% for different set periods and others are charging monthly interest. As of this month the three cards are costing us £505 per month on a combined balance of £19k. The loan would be £455 per month for £20k over 60 months.
If we carried on paying £505 to the 3 cards then we would have them cleared in 37months or less (as the interest comes down), but would also have the hassle of finding another 0% deal which might not happen.
I’m really unsure whether to accept the loan or not.
What would people advise?
Thank you in advance!
Jan 2020: Loan £3,576.17, Credit Cards £42,401.86, Store Card £1,833.61, Overdrafts £2,300.00. Total Debt: £50,111.64 / 1% = £501.12
Jun 2020 Update: Loan £1,925.63, Credit Cards £37,541.74Overdrafts £1,540.00 Total Debt: £41,007.37 / 1% = £410.07
Jan 2021 Update: Credit Cards £34,189.49, Overdrafts £900 Total Debt: £35,089.49 / 1% = £350.89
Jun 2020 Update: Loan £1,925.63, Credit Cards £37,541.74Overdrafts £1,540.00 Total Debt: £41,007.37 / 1% = £410.07
Jan 2021 Update: Credit Cards £34,189.49, Overdrafts £900 Total Debt: £35,089.49 / 1% = £350.89
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Comments
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I'd go the 0% balance transfer route every time.
£455 x 60 is £27300. You've only got £19000 of debt.
You do need to keep your credit history clean, though. Have you read this?
https://www.moneysavingexpert.com/loans/credit-rating-credit-score/
and this
https://www.moneysavingexpert.com/eligibility/credit-cards/0 -
I agree the BT route is better.
Consolidation rarely works - chipping away at the credit cards and shuffling them onto 0% deals when you can means you can focus on the deal ending soonest and then the next and so on. It will feel like bite size chunks rather than the commitment of £x for 5yrs.
Get an emergency fund going so you don't revert to cards as you are paying them off.
Address the reason you have the debt too so you can prevent it happening again.
All the best.I’m a Forum Ambassador and I support the Forum Team on the Budgeting & Bank Accounts, Credit Cards, Credit File & Ratings and Energy boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.
If you can't be the best -
Just be better than you were yesterday.0 -
Well I thought that at least one of you would have linked my thread?!Savings as of April 2023 Savings account - £26460.50(14474.88)Current account - £2140.24(4576.79)Total - £28600.74(19051.67) £1010 (£65pm CS/BS) £250 CS/BS/JS0
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Thank you for all your advice.Jan 2020: Loan £3,576.17, Credit Cards £42,401.86, Store Card £1,833.61, Overdrafts £2,300.00. Total Debt: £50,111.64 / 1% = £501.12
Jun 2020 Update: Loan £1,925.63, Credit Cards £37,541.74Overdrafts £1,540.00 Total Debt: £41,007.37 / 1% = £410.07
Jan 2021 Update: Credit Cards £34,189.49, Overdrafts £900 Total Debt: £35,089.49 / 1% = £350.890 -
I'm another who agrees about not going down the consolidation route as it would cost you more in the long term.
Keep paying what you are to each credit card and hopefully once the balances are lower you may get some more 0% promo offers so you can transfer across them. That or you may be eligible for further 0% balance transfers down the line. As long as you make the payments you should be fine. Personally I'd rather pay an extra 50 more each month and have it cleared within the time frame you mentioned rather then drag it out on a loan near enough double the time frame costing you more with the high interest.
If it were me I'd focus on paying more towards the credit card which promo ends first and then split payments between the other two. Once one is cleared, you can always use as a back up and it may offer further promotional deals. If through this you may be able to ask for a larger credir limit meaning when it comes to finding another 0% deal, your current card may offer you another deal.
Another thing, make overpayments when you can every little helps.
If you need help on budgeting or anything then post a SOA and I'm sure people can possibly see if you can cut back in areas.
Good luck.Chandelier.
Current Debt Repaid:
£104/£619.
Check out my Diary
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Using an online calculator, the loan rate seems to be 13%, and the interest by 60 months would be £7300, first month interest £216.
If some is at 0% at the moment and the rest at worse than 13%, for a guess 20%, then the overall average interest may well be under 13% anyway, so it isn't urgent to go for this loan.
Frequent advice here is that consolidation loans are risky, as the loan is used to clear the cards, but then it's too tempting to run the card balances up again as well
If it is nevertheless still tempting to consider such a loan, how about applying in a few months (6 to 9) time for a more modest amount, such as £7k5 to 10k. Loans in the £7k5 to 15k range tend to be at better rates, and with a lower outstanding aggregate balance by then that might help too.
Even then, I wouldn't say definitely go for it, not if they still say 10 or 12%, not for over half the total, and not for as long as 5 years. Recycling some 0% offers would still be better.0 -
Do not consolidate. It will be more expensive and take longer to clear the debt.
If you have three cards make a note of whether they are charging interest and if so what the rate is. If 0% when do the deals expire?
The lower your overall debt the easier you will find it to get 0% deals and longer ones. If you are not being offered a low rate for a loan chances are your debt is too high at the moment.
Target the interest charging cards for now.I’m a Forum Ambassador and I support the Forum Team on the Debt free Wannabe, Budgeting and Banking and Savings and Investment boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.0
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