10k loan

[greenisaneutral]

We're thinking of taking a 10k loan so we've got a lump sum to get our final bits of renovation done before baby comes in 4 months. Wont have any problem paying it back or getting one, but haven't done bank loans before and wondered what advice people have to do it in the best way, aka not crazy high monthly repayments while keeping it as short and low interest as possible.

Happy to put it over 5 years as we're planning on paying it off before then with next year's or year after's bonus.

Been on money supermarket but the APR seem high (9.6%), our NatWest one is lower (6.6%) but doesn't show up in searches so feel there's a better deal somewhere I can't find!

Thanks in advance

I’d look at putting the spending on a 0%credit card if you’re looking at paying it off next year

What if baby is ill and you can’t return to work ?
what if you lose your job while on mat leave, or your OH loses their job ?
financial disasters can and do happen with no warning, so be careful you don’t over commit when heading into the unknown of becoming a family

Don't do it. Save the money and pay as you go.

I took out a 14k loan from our bank - applied on my phone and had the money in minutes. I think I am paying a similar interest rate (Halifax). Payable over 3 years at 470/month

Advantages to me were that after I had got the loan I was able to 'fine tune' it - we were buying a car so I was able to repay some immediately when we paid a little less than I was expecting - reduced the size of the loan to 12.5k

Early repayments reduce the length of the loan rather than monthly repayments. I will be repaying another £3k in a couple of weeks when a savings account matures. The first repayment cut the term by 4 months. The second will cut the term by a further 8 months and save £471 in interest.

Having the loan with my main bank means I can manage it alongside my other accounts. I will continue paying into savings then make additional payments as and when I feel we have a sufficient savings cushion to meet day to day needs.

Does your own bank offer loan products to existing customers? I would generally start there.
Just make sure there are no penalties for early settlement.

xpost with Gnome

What is best will depend on how disciplined you are. Will you use the loan as intended or is there a risk you will frivol some of the money away? Same with paying off a chunk of the loan with a bonus. Will you actually do it or is there a risk you will go on holiday instead?

For me taking the loan was a balanced decision. We had savings elsewhere I could have used but they are in an offset mortgage savings account. I am trying to get the mortgage paid off quickly for other separate practical reasons.

Sensible advice and I absolutely agree in principle, but our biggest fiscal responsibility is our mortgage so we'd have much greater problems in those situations than the 10k loan and we are in a privileged position in that we will never be left homeless in those worse case scenarios. We are well insured for illness and both in careers that we could easily move to other jobs if we lost them.

I feel that if we lived our lives by 'what if', we wouldn't ever stretch ourselves and improve and I think it's worth the small risk. Plus quite frankly, we currently have no kitchen or living room and I need them for maternity leave!!

I borrowed on my mortgage with nationwide. Much cheaper than an actual loan. I think it was a home improvement loan.

NatWest is our current account and offering 6.4%, is this likely to be the best deal rather than being a new customer elsewhere? We have small amounts on 0% credit cards but in case we aren't able to make the early repayment, I'd be reluctant to put it all on one of those in case we run out of time before we're able to repay. They go to high interest once the time is up, whereas a loan would give us time just in case. Perhaps could split the 10k across 0% and personal loan?

That's useful thank you, was it a lengthy process? I thought we'd have to get the house revalued in order to do so which would take quite a while? Also, I rather think our valuation is dependent on us getting a living room and kitchen in 😂

Sorry, replied to many of your points to Dearg rather than you!

I have allocated every penny of the 10k we'd be borrowing, dividing it by room, then trade so no chance of frittering it. My husband in particular is very financially cautious, hence why I want to find out the best way to do this before speaking to him in depth about it, so I have a complete plan that doesn't make him go into panic mode at the idea of the debt

Put it on a credit card, you can move any remaining to another 0% credit card for a smaller fee than the % you’re being quoted on a loan.

My only concern is 0% term is less than 5 years which doesn't give us any grace if we end up unable to pay back early. And I have a worry that we'll end up unable to get any more 0% and then be stung with huge interest. Is that unfounded?

At that point you can get a loan.

But you will have paid down a lot of it. Ultimately you’ll be paying less back with 0% interest than the interest on the entire loan.
Also OP, no offence, you’ve gone from being adamant you can pay it back to saying you won’t be able to. Worth maybe putting the plans on hold?

No brainer-get it on a 0% credit card

I've got £22k across 2 credit cards at 0%. And I have a gorgeous kitchen as a result.

I'm paying the minimum balance on both CCs, whilst squirreling as much as I can into a high interest savings account each month.

I've already had one card promotion rate expire, so I switched it to another 0% card for about £300 fee, which is far less than the interest i would have paid on a loan over that 22 months.

I'm getting about £80pm interest on the money in the savings account.

When it's time for my mortgage to renew, I'll pay the CCs off in full with the money I've saved.

If you can pay it back easily then save rather than take a loan

@OnlyFoolsnMothers no offence taken at all, but I wasn't adamant, I said we plan on paying back - we've had healthy bonuses for the past 5 years that would be able to repay a loan of that size back in full. However, bonuses are not guaranteed so I don't want to assume - that would be incredibly foolish, so am making sure we don't get ourselves into trouble if a big bonus doesn't happen.

0% sounds like it may very well be the way to go. Thank you for the advice 🙏🏼

We normally would and always have saved for these things, but are at the last stages of a renovation and have a baby on the way, so need to get the last bits done before November

Your bank rate seems good look out for flexibly and we always use Sainsbury's or a loan that gives you some points etc, I think most high streets have them M&S etc. I think if I'm taking money at least get something back.

The 0% cards are great but is the OP is paying trades for renovations they won't be taking card payments which is why I assume you are heading down the loan route.

May I ask how long your interest free term is on them both? As long as we had enough time to repay and were able to repay lump sums as and when, I agree it sounds like the best option!

One card is on 27 months, the other 24 months.

The 24 months is a replacement of the previous 22 months.

I did a money transfer on an existing credit card with a high limit, then balance transferred that amount to the new 0% credit card the same day.

No need for a loan to get your hands on the cash.

Of course - I'd forgotten we wouldn't be able to pay trades with a CC. I think best option is to divide the 10k needed between another 0% and loan, as low as possible.

Whether you can put this on your mortgage will depend on the specific terms of your mortgage.

Mine is a flexible offset lifetime base rate tracker. I have a credit limit within that. So I could double our mortgage if I wanted to just by contacting them. There would be no need to get the house revalued.

However our circumstances are different. We have only a small number of years to go on our mortgage. Our current outstanding mortgage is about 15% of the house value. As far as our mortgage company is concerned we are a pretty good bet.

If your planned costs are a mix of buying things and services then a mix of loan and interest free credit card makes sense.