Best loan.....

[cahu]

i want to get a loan to pay off my credit card which is about £4,500. Can i add onto an existing loan and would it be advantageous to do that or should i just search for the best rate I can find. TIA

Generally the more you borrow, the lower your interest rate is likely to be. What matters more to you, having a lower amount to pay each month or paying it off as quickly as possible?

By "adding" to your existing loan, you are actually taking one larger loan to refinance the existing one, so you can move the whole amount to elsewhere if you find a lower interest rate. Just ask your current lender for a settlement figure.

I see Rockchick, thanks. Didnt think of moving the existing one.....

Try and balance transfer to another credit card. Most do 0% offers. I did this and paid it off in a year.

K999, I have been doing this, but I owe too much to pay in a short amount of time and find it a bit stressy moving it around every so often. Also its on 2 cards so i just want to get it into one payment and forget about it iyswim.

If you have £4,500 outstanding on credit cards and other loans besides, if you owe too much to keep up with the payments, rather than taking on more debt, consider talking to one of the free debt advisory services such as CCCS, CAB or National Debtline. There could be other ways to tackle your debts.

Cogito, its not that I cant necessarily afford it, I just want to simplify my budget iyswim and get it into one lump and pay it off.

The biggest danger by far with debt consolidation is that you take on one big loan and find the payment means you're not left with quite enough to meet day-to-day requirements. So you keep the CCs and the overdraft live and get tempted to use them to pay for things, running up more debts. If you're happy that you can budget accurateely, zero the overdraft, decommission the CCs and meet the payments on the new, bigger loan then it can work. In answer to your original question.... get the best deal you can rather than adding to existing loans.

You are spot on which is why my credit cards are so high now. Have finally realised I have to live to a strict budget, whilst paying off loans and cut up the cards...!

I know it's a pain in the arse to balance transfer every so often but I think that's your best bet. MSE always advises not to consolidate using loans. For one thing, you'll pay interest on that £4.5k loan whereas if you balance transfer your two cards to one 0% card, there'll be no interest so it'll be paid off quicker. The best loan rates are for higher borrowing, so if you borrow the relatively small amount of £4.5k the interest rate will be pretty high, so each month some of your payment will go to the interest rather than the loan itself. Also, with a loan you have to make a set payment per month but with a CC if you're a bit skint one month you can just pay the minimum then up it when you're better off.

You can get some great long term 0% CC deals atm which mean you won't need to balance transfer again for quite some time. I don't know who you bank with but HSBC have a CC that's 0% for 23 months if you have a current account with them. There are similar deals around if you bank elsewhere - the details are on MSE.

I've just BT'd balances from two different CCs to the HSBC card and am going to do my best to get it paid off before the 0% rate runs out in just under two years. Not sure I'll manage it but will make a huge dent in it at the very least.

Btw, there's a great budgeting tool on MSE, which might help you see where you could cut back. It's really, really helpful.

Thanks Kitty, I'm hopeless at budgeting but have been trying ..... Im taking your advice. Off to look on MSE now.

It takes a while to do your whole budget as it takes into account things like how much you spend on presents throughout the year, Christmas spending, food spending, - the lot. It then tells you if you're spending more or less than your income. I try and update mine every three months or so, which is much quicker as I only need to amend the things that have changed, then re-save to my laptop. You can find a link to the budget planner on the Debt Free Wannabe section, and once you've done your budget you can put your SOA (Statement of Affairs) on the forum and people will give advice as to how you can save money/make money etc.

I love MSE and try to look at it daily as it helps to motivate me to spend less and chuck more at my debt. It's a long, hard slog though (5.5 years and counting!).

"if you balance transfer your two cards to one 0% card, there'll be no interest "

That is not strictly correct. There is usually a 3-4% transfer fee so the £4500 CC balance will go up by £150-£180

"with a CC if you're a bit skint one month you can just pay the minimum"

Paying the minimum is usually how people like the OP get into trouble in the first place. The whole point of transferring a balance either to a 0% card or a loan is to budget well enough to pay off a regular amount each month. If the OP consolidates and ends up 'a bit skint' they will only be adding to their problems.

"There is usually a 3-4% transfer fee so the £4500 CC balance will go up by £150-£180"

That's true but even if the interest rate on the loan that the OP intends to take out is quite low, over the loan period it will no doubt incur much more in interest than the balance transfer fee is, so she would benefit more long term with a 0% CC.

"Paying the minimum is usually how people like the OP get into trouble in the first place. The whole point of transferring a balance either to a 0% card or a loan is to budget well enough to pay off a regular amount each month. If the OP consolidates and ends up 'a bit skint' they will only be adding to their problems."

But this can happen with the loan too, except she'd have no room to manouvre. Believe me I know all about only paying the minimum - I've been stupid there! However I dont mean that she should only pay the minimum every month, just that if an unexpected expense comes up one month, say car repairs, she'll have some breathing space. I pay £100 per month off my card and as its 0% the whole £100 goes to pay off my debt. This is way more than the minimum payment so if I have an unexpected bill I can reduce the £100 a bit, rather than use my overdraft for the unexpected cost. However I agree that sticking to a budget is the way forward, which is why I pointed the OP towards MSE, as there's a lot of support on there for and from those of us in a similar situation.

Well, my credit score is low so after I was refused once today I balance transferred one amount that was due to finish 0% next month onto my long standing card....and upped my direct debit payment above the minimum. And then CUT UP both cards!!!

I'm hoping that I can improve my credit rating and move the whole amount to 0% eventually but in the mean time I have set a strict budget so that I dont need to rely on credit... although cards cut up so temptation is gone.

Living within my means is something I have found hard to do but I feel I have made a start so thank you for all the advice, I appreciate it. x

Good luck, OP, and if you ever venture over to MSE I'll see you there!

Thanks Kitty, good advice, Mumsnet is a Godsend sometimes!

No thanks, £4,500 is not a short term payment.

Spam alert!!!! The road to hell is paved with payday loans.

Reported the payday loan, not just for being unauthorised advertisement but because they are a bunch of wankers and I have no clue how they are allowed to operate.

Thanks Hugandroll, they seem to be able to infiltrate....

I reported it too at lunchtime - glad to see they are unanimously hated.