Help me make a financial decision. Should I take this loan?

[MoneyManager]

I have a poor/fair credit rating. I’ve always found it difficult to manage money (I was diagnosed with ADHD late teens) and due to circumstances which left me homeless in my teens, I become extremely anxious if I have no emergency access to funds.

Over recent years, I’ve worked hard to build up my credit rating and I’ve not missed a payment in over 3 years. I’m now starting to get offers via my bank for loans and overdrafts.

I have a credit card with a £5k balance on it; it’s a high interest credit builder card and I’m paying £200 per month in interest alone. I pay the minimum payment each month but realistically the card won’t be paid off for a long time as the interest is high.

The repayment for the loan I’ve been offered is £267 per month for a loan of £10,000 over 5 years.

I am considering taking it with the idea that I pay off the credit card, cut it up and remove it from my phone (but keep it for serious emergencies eg: if I needed to replace my car and couldn’t finance it any other way).

I would then use the remainder of the loan to :

Start a savings pot (£2000)
Pay some small miscellaneous bills (not household)
Buy some furniture I need.
Pay off a smaller credit card (£1200)
Book a small trip (circa £300)

If I take the loan, I’ll break even each month when I consider the repayment on the credit cards I’m already paying vs the new repayment of the loan, but it will be beneficial in terms of having savings and paying off a high interest card.

Because it won’t save me much money each month, I can’t work out if it’s worth it or if I’ll just end up worse off?

I can easily afford the repayment, especially as I would no longer be paying the interest or minimum payment on the credit card. I’d also ensure I have some savings out of it to cover the repayments if needed (but I don’t envisage this happening).

Thoughts?

Do not take out a loan. You will simply double your debt. If you can look for an interest free period on a transfer type different credit card. Apply for that transfer your debt to interest free and pay it down every penny you can whilst you are paying no interest. Cut up your old card.

Aside from the general financial advice on the loan, I suspect you would benefit greatly from ongoing moral support and sense-checking. What about joining the debt-free wannabee forum on moneysaving expert (or any other one you fancy!). It's a whole community who you can chat about things with people who are in similar situations and help keep you on the straight and narrow.

You say you are anxious about money yet considering going into debt. Don't do it.

Rein in all spending. In the long term it will give you peace of mind.

I wouldn’t. You’ll be more in debt. As you’re putting some of the loan into savings, you’re paying (the interest) to save money. Have a look at the Dave Ramsey method. You could be out of debt fairly quickly.

If I were you I would not take the loan, and transfer the balance of the credit card onto a 0% interest card. And keep transferring it when the 0% ends. If you paid £263 off a month you’d be debt free in 19 months. Or is there a reason you’re not doing that??

If you are set on taking the loan for the £5k don't take the first offer. Shop around. Compare APRs. Use a well known company. Check for hidden fees.

Ive read the thread and know you can’t get a 0% credit card yet OP, but one will be available to you in due course once your credit score goes up.

In the meantime concentrate on the debt, you won’t die from not going on holiday or buying new furniture. Second hand shops like the Salvation Army etc are your friend, and they deliver for a small fee. Knuckle down on getting rid of the debt.

Id check the apr rate on the credit card you gave the smaller amount in and if it’s more than the loan would be then I’d take the loan for the amount of both your current debts and pay them off.

keep in mind that your car WILL break down again or need an mot etc at some point so you need to factor that in. I get an oil service if I can afford a full service as the oil is critical to keep the engine going. And I get a full service the next year.