Should I get a longer loan with cheaper repayments?

[username9988]

Due to divorce/court and related unemployment, I have two personal loans and a large credit card debt.

Add this to the car finance and I'm paying over £900 a month to pay all this off over five years.

I now have a new job, and whilst this is affordable, I don't have much of a life. Eldest DC will leave home in 6 years, and I'm worried that we won't be able to do things while we can.

The house has about 40% equity. I've gained quotes for a secured loan to pay all four off over ten years, costing me around £400 a month.

So this reduces my outgoings massively, but doubles the length of the debt. It feels like the best option, or am I just being foolish, and need to crack on with paying it all off asap...

What do people feel is best? Or does anyone have personal experience?

Overall what interest are you paying. I guess it will be a lot more over the longer term but it depends on interest rates.

Personally i wouldnt extend unless it wasnt costing much more as the interest rate deal was a better one.

Credit card is 18% and no option to switch as bad credit.

Loans are around 5%.

Car finance is the standard...not really sure.

The new loan is 9%.

If you tell us the actual amounts on each I can work out the true % interest you're paying and tell you factually which one is more cost efficient (although you may have already done this?)

Have you compared the total amount repaid as £900 x 5 x 12 = £54k and £400 x 10 x 12 = £48k, which is less, which could be right if the interest rate is lower, but it does sound a bit 'too good to be true'.

But it's secured. Is it a remortgage with your bank or a second mortgage from a 'loan in the back of the paper' type lender? Is the interest rate fixed? Have you actually been accepted for the rate that you're basing your sums on? A long time ago we nearly went for a secured loan and I'm really glad we didn't because a lot of people got into trouble when interest rates went up.

Other things to think about - is your job secure? If you increase the amount secured on your property, you've a bigger risk of losing your house if you become unemployed.

How does your budget stack up. Getting loans to pay off other loans is often a sticking plaster to cover a great big hole in a budget when someone doesn't really understand where all their money is going.

If you haven't done so already, whether you take the loan or not, I'd really recommend doing the Moneysavingexpert money makeover

But really make sure you can afford all your outgoings before taking out the secured loan. And that includes things like new cars, Christmas, holidays, insurance etc. Because you'll be paying for the car you've got now for the next 10 years (with the loan) so you really shouldn't change your car within this period, unless you save up cash for it, rather than taking out more credit.

Also, if you do take the loan, one thing that you must must must do is not take out any credit at all until the loan is paid off. Maybe keep one credit card and use it for a bit of normal spending but pay it off in full every month, but do not fall back into the trap of more credit.

From what you have said, it may be a sensible course of action, but there's plenty of scope for it to go very very wrong if you're not careful or simply unlucky in life.

I think I've done this. If I increase it to 10 years, it will cost me about £6k extra overall.

Job is secure and the new loan is fixed. I have been approved for it.

I've never ever been in a mess financially. Ex took me to court for years for the kids and it cost an absolute fortune. Then I lost my job as I was off through stress for too long.

Ah, if you have bad credit will you get a 5% loan? Check carefully. Also check that it's 5% APR not 5% flat rate, which is more like 9 or 10% APR. Work out the actual total repayment numbers.

If it's a adverse credit mortgage from a reputable provider it may be OK and you might be able to refinance on a better rate before the end of the term but if it's variable there is the risk that the provider will put up the interest rate simply because they feel like it or it's linked to some fairly obscure index that many don't fully understand.

Those first four figures on my list are the current loans that I am already paying. The 9% is the consolidation loan.

Car is only 1 year old. Had to buy it from company as it was a lease car still under contract. Would have cost more to return it and then finance another car. Work involves driving so need a reliable car.