Would you take a loan out In these circumstances

[LoanyPoany]

Hi! I know to take strangers advice from the internet with a pinch of salt but I just wanted to know what others would do in my circumstances.

I have a some debt which is:
1600 outstanding on a car loan, I pay £150 a month for this
£330 on monzo flex (basically a credit card)
£430 on a Lloyds credit card
£320 on Very
£600 to family member

I am really trying to build my credit rating up. I haven’t missed a payment in 4 years and in 15 months my credit rating will be clear of any defaults which I’m really proud of. I have adhd and bipolar and these can really affect my decisions around money but believe me I am working so very hard to rectify this. DP has a good job but we have seperate finances (always have, always will, my parents were the same and I prefer that). He has savings, investments etc and abour £3000 in debt which he is paying off monthly.

My monthly bills are
£760 joint account
£45 phone
£29 bus pass for son
£60 school dinners (he has gone into high school and doesn’t want sandwiches any more)
£14 professional body membership

I also have a holiday I pay £175 a month to and this is paid off in December. I have about £2500 in savings which I’m very proud of even though I know I should pay my debts off with it, I still want a little buffer.

Lloyds have offered me a loan and I have worked out I can pay off everything I owe (all of the above), consolidate it into 1 payment of £250 a month and have this paid off within 15 months.

i am not sure if this makes good financial sense. My head is telling me yes but I am worried about how it will look on my credit rating taking out a loan although my research shows me that paying on time and showing I am responsible with credit limits improves things (which I am, my current credit limits are 7000 and I’m using a lot, lot less than this)

what would other people do?

thanks in advance.

Sorry that was meant to say end this month, not this morning!

The very has (very high!) interest on it so I will pay that off as well. Everything else is interest free

Oh (sorry!) the phone is mine and DS’s, I actually reduced it down I was paying £75 just for mine plus DS! So it has reduced by over half

Sorry I've clearly misunderstood and thought the car loan was the highest. It sounds like a great plan! I didn't know anything about finances until I started reading the Money Saving Expert emails, and I've also found the UKPersonalFinance sub on Reddit really useful.

The loan is high interest but the very account is definitely more but the balance is a lot lower

And thank you all again for your sound words! I need to break the cycle and I’m not going to do that by taking out MORE credit

Hi ...just realized that some of your loans are interest free so changed my mind 😃 I would never take out a loan which includes interest to pay off an interest free loan. I now think you should pay; df the loans with interest out of your savings and just keep on steadily paying off the interest fee loans.

I think you should use your savings to pay off your debt and then start saving again.

Why? Because that little buffer isn’t a real buffer is you also have debt.

For example if you lose your income and are unable to keep making monthly payments, what then? You’ll have to use your savings.

I used to be in a lot of debt. I cannot describe to you the relief of no longer being in debt. Pay it off and then start saving again. It will take so much weight off.

I meant to say, I’m primarily thinking in terms of your sanity and wellbeing rather than anything about interest rates or what makes sense on paper.

I didn’t realise how much being in debt was weighing me down until the weight was lifted.

Don't borrow money when you have savings. The loan from Lloyds is going to cost you £250 a month for 15 months. Borrow the money from your own savings instead of them.

Use your savings to pay off as much of the debt as you can, and then you will be able to start saving again instead of paying off loans. The car loan might have early settlement penalties anyway, so leave that one alone.

That's a great idea @LoanyPoany once you've paid all the debt up you'll soon rebuild your savings. I try to keep £1000 as a buffer as that will cover most minor car repairs, new washing machine etc if it goes.

@HildaHosmede has aldo laid out great instructions.

I like the Debt Payoff Planner app, the free version is great, you can put in the amount you owe and the interest rates and it'll tell you the best way of paying it back and shows you how quickly it will be paid off as you add in each installment

I would definitely use your savings to pay off as much of your loan as you can. If there is some left take out the loan you mention at a lower rate to pay it off.
The ones you pay no interest on you can leave as you are not paying any extra on them but make sure you can pay them off before your interest free period ends.
You can start building your savings up again when you are debt free as the interest you will get on your savings is likely to be lower than the interest you are paying on your loan.

I totally agree with this.

Google Dave Ramsey Snowball method, I would do that.

Or if you don't want to do the snowball then I would definitely take the loan personally, lots of payments will feel overwhelming but 1 lesser payment for 15 months seems more manageable. Atleast in my head anyway, plus I'm sure the family member will appreciate not having to wait.

Do this and pay the debt off starting with the highest interest rate first then commit to save every month instead.

How many hours a week do you work and could you do a bank shift or two a month until you're out of debt? Even full time hours would make a noticeable difference to the money you'd have available towards your debts.

Thank you so much for everyone’s opinions and honest, solid advice. I was pre-approved for the loan this morning, crazy to think a couple of clicks and I’d have had thousands of pounds deposited into my bank!

I have been out this morning and had a good think. I am going to wait until payday today to see how much back pay I get (I’m not holding my breath it’ll be much 🤣). I did 3 bank shifts last month so I’ll be paid for them which will also increase my wage and whatever I’m paid above my normal salary I’m going to pay straight over. I am going to do a lot more bank shifts for the next couple of months, I am fine to do them but I find the job so stressful I don’t like doing extra hours but needs must. I am going to use my savings to pay off the car loan, the very account and my mum (she’s in no rush for that as it was a buy now pay later thing we chipped in for BUT again, proof I’m living beyond my means).

What I have left I can then pay on the smaller debts. I think in my head I didn’t owe much and it was manageable but having written it all down it is so much money and I haven’t been debt free once since I was 18 and got my first credit card, every single month of my life I have paid money back in debts which is absolutely insane

Never ever borrow money and take a consolidation loan . This is basic advice from money saving experts debt free board.

And all the other posters are right, , you have interest free cards, so a loan you pay interest on is not very sensible.

Now, cut up all but one of your cards, delete the numbers from sites you buy from. Freeze the last card in a Tupperware of water, so the card is in a block o ice you have to defrost to buy anything.

Plan your retirement as working in the NHS until you are 68 sounds impossible