Good time to get a loan?

slinxy

slinxy

slinxy

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I'm wondering with the current credit crunch and low rates, if this is a good time to take out an unsecure bank loan? I've currently already got a loan but my bank is offering me another one at a lower rate to pay off my current loan and give me some extra cash.

My current cash flow is good, so i don't really need the extra cash, in fact i was looking at using my savings to pay off my current loan, but i would say i need a new motor in the next year and looking to buy my first house.
 
take out the loan to clear the last one, yes.
borrow more on top? no

classic way to getting yourself into trouble.

consolidation is good, but not if you borrow more on top.
 
Some sensible advice there from Morba. Go to Money Saving Expert and post all details, interest rates etc there and they will tell you the best course of action :)
I have spent the last 3 years getting myself totally debt free (was at Uni the previous 4). It is difficult, especially when you see all your mates spending money they don't really have, but stick with it. It's very rewarding once you achieve it!
 
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the interest rates are great at the moment, I could've paid up all my car upfront but instead paid off a bit then took the rest on finance since my ISA gives a rate of 6.8% and my finance is a rate of 5%...so keeping the money in my ISA is actually making me more money instead. Win
 
[TW]Fox;11501273 said:
So dont borrow any more. People borrowing routinely is what is causing much of the current economic issues.
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Alternatively, re do the loan and with the extra cash you will be getting back (by borrowing only enough to clear the loan) you can pay off more of the loan, meaning it will be paid off sooner :]
 
Get rid of debt, that's the advice I've had recently from a financial advisor. We're looking to upgrade our flat for a 4 bedroom detached house at the end of this year and have been told to remove as much debt as possible, ditch all but one credit card (with a low limit) and get some more savings. Essentially maximise the amount of disposable income we have each month.

In your situation I'd wait, now isn't the best time and next year could well be far, far better for those of us who have been savvy with our cash.
 
Toker said:
my ISA gives a rate of 6.8% and my finance is a rate of 5%...so keeping the money in my ISA is actually making me more money instead. Win
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Are you sure? What ISA pays 6.8% and what loan company gives 5%?

I thought the best proper ISA deal atm was Icelandic Bank @ 6.1% APR.
 
i'll find out tonight, my mums the family finance guru so i don't even bother researching it, I just put my cash where she tells me to. All I know is its a newly released scheme as ISA's have recently changed or something.

the loan company is a branch of a bank which i can't remember but can also find out tonight. the dealers normal interest rate is 6% but as part of my cars deal they reduced it to 5%
 
So it's a car finance deal, it will be 5% flat. This is probably about 10% APR :)

There is no way you've got a good enough credit rating to get a 5% APR loan especially living at home.
 
to be honest i'm not entirely sure as i just threw it my mums way and let her work out what was best.

i have a house it's just getting done up at the moment ;)

edit: thinking back it is flat rate, but with my ISA's interest rates it's still making me money having it on finance
 
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Stonedofmoo said:
There is NEVER a good time to get a loan. Think of all the money you will be paying someone else while you pay it back.
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so borrowing the same amount as you owe at a lower rate, then using the extra cash each month to pay off that same loan, is not a good idea?
 
well i'm a few hundred quid a year better off cos of what is effectively a loan, I wouldn't call that a bad thing :)
 
Stonedofmoo said:
There is NEVER a good time to get a loan. Think of all the money you will be paying someone else while you pay it back.
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Not so.
If you can borrow money and use it to get a better rate of return elsewhere, there is nothing wrong with "paying someone else".

Think about it. Our whole banking system revolves around the idea of people lending and borrowing money. Why do you think so many students take out student loans, yet don't pay them back even when they have the cash? Simple - because they are using that loan to earn themselves more money than they are paying in interest.
 
Yeah I don't get the big anti-debt thing really - say I wanted to go on an awesome holiday - I'd rather take out a short-term (say 12 month) loan and go now, then pay back over 12 months (and pay an extra £100), than have to wait a year and save up, by which time circumstances may have changed and it wouldn't be so awesome.

Interest is just the fee for the convenience of having money now rather than later :p
 
True, but I suppose it depends on what kind of medium-term outlook you have on life.

Taking out loans and paying a lot of interest can hamper your ability to enjoy life in the future while you service that debt. One thing I've never really understood is people who are constantly overdrawn, credit cards maxed out, often getting late payment fees, over od limit fees, direct debit failure fees etc. All that is doing is just making things even WORSE for the future.

To summarise, what I mean is that by spending a little moretoday, you often have a lot less to spend in the future. There is this idea that 'life is too short, have fun while you can' - but the fact is, you can actually have MORE fun by being sensible with spending in the short term.
 
Whilst it's half said in jest, there is a point especially if you discipline yourself to only take short-term loans (<12 months). However start getting into 2-5 year loans and then I think you're throwing money away a bit. Short-term loans can be pretty useful though IMHO :)

To use the holiday example:

£1,250.00 borrowed over 12 months @ 10% interest rate

12 x repayments of £109.89 - total repaid - £1,318.74

Total interest paid = £68.74, or £5.73 a month for the convenience of having money 12 months early. Doesn't seem so bad like that?
 
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