New unsecured loan - good idea?
Discussion
Anyone taking out unsecured loans right now?
Hearing a lot of people say that in rising rate and inflation environments you should pay off all your debt.
I have 1500 left on an old loan. Bank offering me to roll it into 17/18k at pre-approved 4.1%. Previously was offering 3.9%.
Thinking whether to take it to lock in the rate before it goes up. Have a modest house, manageable mortgage but renovations needed (hence the manageable mortgage).
Live pretty modestly and could clear the loan plus fee from savings. Was going to fund the renovations out of savings but seems worth locking in 4.1%?
Edit to add - would add 7 quid to my monthly but obviously take me from 1 year left to 60 months so no change in outgoings but extending the term.
Our mortgage fix is up in 3 years so would look to clear it before then.
Cheers
Hearing a lot of people say that in rising rate and inflation environments you should pay off all your debt.
I have 1500 left on an old loan. Bank offering me to roll it into 17/18k at pre-approved 4.1%. Previously was offering 3.9%.
Thinking whether to take it to lock in the rate before it goes up. Have a modest house, manageable mortgage but renovations needed (hence the manageable mortgage).
Live pretty modestly and could clear the loan plus fee from savings. Was going to fund the renovations out of savings but seems worth locking in 4.1%?
Edit to add - would add 7 quid to my monthly but obviously take me from 1 year left to 60 months so no change in outgoings but extending the term.
Our mortgage fix is up in 3 years so would look to clear it before then.
Cheers
Edited by menousername on Thursday 29th September 12:32
The aversion to borrowing is primarily the variable rates, as they look like they will continue to rise. Fixed rate is far less of a risk.
Somewhat depends on whether your mortgage fixed - whilst it might be comfortable now, that may change.
Finally, job security. If there were to be a recession, how secure is your job / income ?
Somewhat depends on whether your mortgage fixed - whilst it might be comfortable now, that may change.
Finally, job security. If there were to be a recession, how secure is your job / income ?
Cheers
In a moderate or brief recession I would give myself a 95% chance of being kept on. Bad recession 60 ish % chance of being kept on. And I am a pessimist so.... glass half empty
Based on current outgoings including the loan amount I could survive a year without income. If I were to get the industry standard pay off I could survive two. Partners job rock solid.
I think the biggest risk is I would have to do something new on a lower salary.
Have always topped up the ISAs but feels like throwing good money after bad this year and seems better to do the renocations
In a moderate or brief recession I would give myself a 95% chance of being kept on. Bad recession 60 ish % chance of being kept on. And I am a pessimist so.... glass half empty
Based on current outgoings including the loan amount I could survive a year without income. If I were to get the industry standard pay off I could survive two. Partners job rock solid.
I think the biggest risk is I would have to do something new on a lower salary.
Have always topped up the ISAs but feels like throwing good money after bad this year and seems better to do the renocations
menousername said:
Hearing a lot of people say that in rising rate and inflation environments you should pay off all your debt.
I've actually gone the other way, and took out a large mortgage on a second property last year.The reasoning being that high inflation will help to erode the mortgage debt. Also the 2021 stamp duty holiday helped with the decision making.
On the flip side, increasing interest rates won't help but I'm looking to hold onto the property for the long term, with the plan to take advantage of increasing property prices (at least in central London).
Mandat said:
menousername said:
Hearing a lot of people say that in rising rate and inflation environments you should pay off all your debt.
I've actually gone the other way, and took out a large mortgage on a second property last year.The reasoning being that high inflation will help to erode the mortgage debt. Also the 2021 stamp duty holiday helped with the decision making.
On the flip side, increasing interest rates won't help but I'm looking to hold onto the property for the long term, with the plan to take advantage of increasing property prices (at least in central London).
But inflation will erode debt.
Debt where the interest is less than inflation doesn't cost you anything.
Debt which costs a bit more than inflation might be well worth what it costs you.
What you don't need is debt you can't afford to service, or debt that cuts down your options, or debt that causes you worry.
I'm mulling over taking out a c.£20k loan for 48 months - I'm pre-approved with Ratesetter at 2.8%. My lease 840i GC is going back toward the end of the year and costs me around £400/mo all in so my thinking is to take the loan, keep the monthly outgoing the same-ish (it's actually £440/mo repayment on the new loan) and put that plus maybe £15k from savings into a lightly-used M4...
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