Is consolidation ever a good thing?

LavenderLily_2 · 23 November 2007 at 6:03PM

Dh owes £8000 on various loans/credit cards/overdrafts. We have written up numerous budgets in the past to try and pay it off but we always end up putting more on the cards again and going backwards rather than paying it off. Basically, our situation was getting worse rather than better.

He decided to consolidate the debts by taking out an unsecured loan for £8000 and paying everything off. We're waiting for the cheque to clear and then the overdrafts are going to be removed and the credit cards cut up. It's a five year loan at £180 p/m so we pay back about £2,500 in interest which is a lot but at least we know in five years it will be gone and we will be debt free. We have vowed not to get any more credit after that (apart from a mortgage one day if we can!).

What are your experiences of consolidation? Anyone had a good experience? Do you think we have done the right thing or are we being woefully naive...:o

D&DD · 23 November 2007 at 6:49PM

Hi Lavender yes I have..although I might add I've had plenty of practise.:rolleyes:
We are currently on our erm 5th ..I think?? Consolidation loan..BUT this time its working..Everytime before we fell into the same trap a lot of people on here have fallen into..we spent on our cards again :mad:
*wheres the biggest font..*
NEVER EVER EVER EVER spend on those cards again!!!!!!
You have now got to be very disciplined,extremely so....
Can I just ask wether the interest rate is now better?? The only reason we did it again was because we had exhausted all our options for a 0% deal we had got rid of a lot of our debts sorted out our finances thouroghly THEN the only debts left were at !7 and more% soooo it made sense to get a loan at 6.9%..:D

Burlesque_Babe · 23 November 2007 at 6:54PM

If you can cut up all of your cards, close the credit card accounts, remove the overdraft facilities and live completely without any credit for the next 5 years (and then after that when you've paid it off) then you are probably 'cured' of the spend/consolidate cycle.

I personally found them to be (initially) the answer to all my problems. But because I (and my ex) didn't do the above, it wasn't long before the problems all started again. I'm a definite 'never again' after taking the bulls by the horns last year and slogging to pay it all off.

Just don't leave any CC's around to tempt you

and have look at the snowball calculator

http://www.whatsthecost.com/snowball.aspx

to see how quickly overpayments will get rid of it.

itsnever2lateisit? · 23 November 2007 at 6:59PM

The issue with consolidation is that it does not tackle the underlying structural problems

DFW's will by default say its a bad thing because of this. IIRC only 1 in 5 people suceed by consolidating, if you are one of them great if not you will soon run up balances on those 'empty' credit cards and of course there will also be the loan repayments on top, so your problems will have multiplied

Before you consolidate draw up you SOA and make sure that your expenditure does not exceed your income (including the loan repayment) with a fair cushion to spare

If you can be diciplined over the period of the loan, then yes, consolidate. If in your heart of hearts you dont think you could stick to it then dont

CLAPTON · 23 November 2007 at 7:01PM

If you can live within your 'new' budget then it will be fine but if you don't then you will end up with a large loan and new debts.
Why not post up your SOA and see whether people here can help.

yellowmonkey · 23 November 2007 at 7:11PM

Echo what people have said.

As long as you do not spend on cards and rack up more debt then OK. My mistake was to pay all my debts off and then get more debt. Hey Ho lesson learnt

ym

jess444_2 · 23 November 2007 at 7:55PM

Hi,
I spent 20 years consolidating and remortgaging. Every time I said that was it and cut up the cards. As someone said earlier, it didn't get to the root of the problem. I don't feel I was ever too extravegant, just spending a little bit more than I earned each month which over time has become a huge debt. I wish that after our first consolidation I had set myself a budget and never used a credit card again. If you can do that I think consolidation is fine. Good luck.

MoneyMagnet · 26 November 2007 at 7:29PM

I got an unsecured loan to consolidate four debts (2 credit cards, a smaller loan & my overdraft) a few years back, and it was the best thing I could have done, since the interest rate on the new loan was so much lower.

But as others have said, it's only a good idea if you are disciplined enough not to run up more debt. I've cancelled my overdraft, but I still use my credit cards for online purchases & a few other things, for convenience - but they are paid off in full every month without fail. I have an instant access savings account with a debit card, & every time I spend on my credit card, I transfer that amount from my current account to the savings account, so it's all set aside in advance, & I just pay my credit card bill each month from that account. I have never been tempted to run up more debt, since my original credit card debt was not the result of compulsive overspending in the first place. But anyone who has a tendency to overspend should be wary of consolidating, and take steps to establish new habits first.

System · 26 November 2007 at 7:46PM

we have just done exactly this and i can say its a relief ,cc have been paid and acc closed, i know there will be posts saying its never a good idea but only you know whats right for your situation.

doodledo_2 · 26 November 2007 at 7:51PM

Consolidation does work for some and not for others.

I am one of the "nots" I am ashamed to say. We consolidated and then just racked up a load of debt again.

So this time debt is being tackled as I realised we have to change the way we spend and the things we do in life to get out of this viscious circle.

Its scary to do but cutting up my credit cards was one of the best things I have ever done.

Good luck

Is consolidation ever a good thing?

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