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  • FIRST POST
    • Jims-in
    • By Jims-in 9th May 18, 3:28 PM
    • 1Posts
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    Jims-in
    Loan vs Credit card
    • #1
    • 9th May 18, 3:28 PM
    Loan vs Credit card 9th May 18 at 3:28 PM
    Hello all
    Just wondering what others might do here.
    I owe 6500 on a credit card at 18.8% paying just the minimum at the moment that's 156, I'm thinking of applying for a loan of 7500 with an APR of 9.9%, to pay the credit card off. The loan would be for 5 years with monthly payments of 157.43.
    I just want to make sure it's the right thing to do.


    Thanks for reading.
Page 1
    • zx81
    • By zx81 9th May 18, 3:33 PM
    • 19,706 Posts
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    zx81
    • #2
    • 9th May 18, 3:33 PM
    • #2
    • 9th May 18, 3:33 PM
    It is if that's the only option you have, and can control your spending on the card.

    Obviously it would be better to get something with a lower rate and a shorter term. But if you're struggling with a 6k debt, your options are probably limited.
    • davetrousers
    • By davetrousers 9th May 18, 3:38 PM
    • 5,639 Posts
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    davetrousers
    • #3
    • 9th May 18, 3:38 PM
    • #3
    • 9th May 18, 3:38 PM
    You owe 6,500 and want to borrow 7,500. Think about it.
    .....

    • Tarambor
    • By Tarambor 9th May 18, 4:10 PM
    • 3,978 Posts
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    Tarambor
    • #4
    • 9th May 18, 4:10 PM
    • #4
    • 9th May 18, 4:10 PM
    You owe 6,500 and want to borrow 7,500. Think about it.
    Originally posted by davetrousers
    Yes you should. The APR threshold with many loans is 7500 and this is important.

    With my bank I can borrow 4950 or 6100 over 5 years and in either case repay 6735 in total because the APR for the 6100 is one third that of the 4950. So in this case borrowing 6100 costs me exactly the same to repay as 4950 but leaves me 1150 better off.
    Last edited by Tarambor; 09-05-2018 at 4:12 PM.
    • katie4
    • By katie4 9th May 18, 4:19 PM
    • 191 Posts
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    katie4
    • #5
    • 9th May 18, 4:19 PM
    • #5
    • 9th May 18, 4:19 PM
    i did this and its worked really well for us
    i got a loan, paid off my credit card and CANCELLED IT ASAP to avoid adding any extra debt, now i dont have to worry about it as it just comes out as one monthly bill well worth it for us and saved us a lot of stress

    • flower77g
    • By flower77g 9th May 18, 5:17 PM
    • 79 Posts
    • 37 Thanks
    flower77g
    • #6
    • 9th May 18, 5:17 PM
    • #6
    • 9th May 18, 5:17 PM
    Another slightly mischevious trick - if the bank will allow it - is to try and borrow 7,500 at the same APR over seven years, paying back the extra 1,000 shortly after the loan is taken out, shortening the length of the loan. That reduces the minimum monthly repayment.
    • Dobbibill
    • By Dobbibill 9th May 18, 5:24 PM
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    Dobbibill
    • #7
    • 9th May 18, 5:24 PM
    • #7
    • 9th May 18, 5:24 PM
    Who is the card with?

    Do they have any cheaper options like a MT? (this normally comes with a fee)

    Have you looked into taking out a different card at 0% and doing a BT?

    Have you been quoted 9.9% or is this just the advertised rate? You may find your personal quote is higher.

    How did the debt arise? Are you sure it won't happen again? (specifically in the next 5yrs)
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    • Pixie5740
    • By Pixie5740 9th May 18, 5:36 PM
    • 13,385 Posts
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    Pixie5740
    • #8
    • 9th May 18, 5:36 PM
    • #8
    • 9th May 18, 5:36 PM
    Another slightly mischevious trick - if the bank will allow it - is to try and borrow 7,500 at the same APR over seven years, paying back the extra 1,000 shortly after the loan is taken out, shortening the length of the loan. That reduces the minimum monthly repayment.
    Originally posted by flower77g
    No, it doesn't. The term would shorten but the monthly repayments would remain the same. Then again some lenders keep the term the same and reduce the monthly repayments so the OP would need to read the small print - which (s)he should do anyway.
    • Pixie5740
    • By Pixie5740 9th May 18, 5:58 PM
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    Pixie5740
    • #9
    • 9th May 18, 5:58 PM
    • #9
    • 9th May 18, 5:58 PM
    Hello all
    Just wondering what others might do here.
    I owe 6500 on a credit card at 18.8% paying just the minimum at the moment that's 156, I'm thinking of applying for a loan of 7500 with an APR of 9.9%, to pay the credit card off. The loan would be for 5 years with monthly payments of 157.43.
    I just want to make sure it's the right thing to do.


    Thanks for reading.
    Originally posted by Jims-in
    If you continued paying 156 to the credit card instead of only making the minimum repayment you would have it paid off in 68 months and would cost you over 4,000 in interest.

    The loan will take 51 months to pay off and cost you almost 1,500 in interest if you repay the extra 1,000 straight away and keep your monthly payments the same. If you don't the loan will take 60 months to repay and cost you over 2,000 in interest.

    One the face of it the loan is less expensive if you have address the cause of your debt and have taken steps to ensure you won't start spending on your credit card again. However, Is that all you can afford to pay towards your debts each month? Could you take a look at your expenditure and cut down on fripperies to increase your payments?
    • flower77g
    • By flower77g 10th May 18, 10:02 PM
    • 79 Posts
    • 37 Thanks
    flower77g
    For the poster above who was struggling with the maths, borrowing over seven years and repaying 1,000 back does indeed reduce the amount to be paid back per month:


    At 9.9% APR:-

    borrowing 7,500 over 5 years: costs about 159 per month
    borrowing 7,500 over 7 years, repaying 1,000 to shorten the loan length: costs about 124 per month



    MSE has a calculator if you want to check the numbers
    https://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator


    Sometimes useful if struggling to make a monthly minimum repayment
    • Pixie5740
    • By Pixie5740 11th May 18, 8:25 AM
    • 13,385 Posts
    • 19,305 Thanks
    Pixie5740
    For the poster above who was struggling with the maths, borrowing over seven years and repaying 1,000 back does indeed reduce the amount to be paid back per month:


    At 9.9% APR:-

    borrowing 7,500 over 5 years: costs about 159 per month
    borrowing 7,500 over 7 years, repaying 1,000 to shorten the loan length: costs about 124 per month



    MSE has a calculator if you want to check the numbers
    https://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator


    Sometimes useful if struggling to make a monthly minimum repayment
    Originally posted by flower77g
    I am not struggling with the maths at all. it is you who is struggling with how loans work. Making an overpayment does not necessarily mean that the monthly repayments will reduce. Many lenders keep the monthly repayments exactly the same regardless of how many over payments are made, all that happens is that the loan is repaid sooner. The irony is that if you used the calculator you linked to and selected the overpayment calculator you would have seen this yourself.
    Last edited by Pixie5740; 11-05-2018 at 8:41 AM.
    • zx81
    • By zx81 18th May 18, 9:52 AM
    • 19,706 Posts
    • 21,093 Thanks
    zx81
    Indian spam
    Originally posted by anupamajha01
    Not something you see on your average takeaway menu.
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