Consolidation Loans

alisonjs · 27 March 2007 at 10:46PM

I have two credit cards which total somwhere around £15k in debt and each is on a high interest rate.

Would you get a low rate consolidation loan if you could? I know some people don't think they're a good idea.

D&DD · 27 March 2007 at 11:16PM

Hi Alison many of us on here have a fair few consolidation loans under our belts :eek: I'm currently on my 5th....
I do understand where you are coming from though as the reason we took out this final one was because we had no way of lowering our interest rates below a rather scary 20+%
A few words of caution from someone who has been there and has the very tatty t-shirt to show for it

1/ Have you truly had your lightbulb moment,full on and burning brightly??
2/Have you done your SOA and saved absolutely every penny you can this way first??
3/Are you keeping a spending diary to see where you are 'leaking' cash??
4/Have you addressed your overspending??
5/We spent A WHOLE YEAR rejigging our finances and making sure our old habits had been broken before weighing up the pros and cons of consolidating..for us it was our best option and we are paying much more on our loan to finish it in 2 years rather than minimum payments over 5 years at much higher interest rates..I suppose I am just urging you to be cautious..its so very easy to feel 'debtfree' once you have lowered your payments by consolidating..You must cut up your cards if you haven't already and DON'T keep one for 'emergencies!!

HTH D:D

southernscouser · 27 March 2007 at 11:22PM

Consolidation can work. Providing yu have control over your spending.

I've consolidated probably 5 or 6 times in my life, all when I didn't have control and each time I got further into debt!

Don't be fooled that only having 'one, easy, managable payment a month' is your best option. It may sound like it but it very rarely is!

You need to sit down and do the maths!

Work out how long it would take you to currently pay of your debts by using this nifty little tool. Play with the figures so you can get an idea of the time it could take if you paid extra each month. Then compare it to a loan term. Remember that should you ever be fortunate enough to pay the loan of early all the interest will be front loaded!

Quite often it is better to transfer your credit card balances to those with lower rates (if you get accpeted). The downside is that you might just be tempted to pay the minimum payments though. But then same with a loan the chances are you will take it over the longest period to have the lowest monthly payment!

You have to find a balance on whether you want to be rid as soon as possible, as cheap as possible of the long term or the cheapest monthly! :think:

datlex · 28 March 2007 at 9:29AM

Trouble is with consolidation loans is that you end up paying more interest than you would have by speaking to the firms you originally had debts with. And also end up in debt for longer. Firms aren't really interested in why you want a consolidation loan and often fail to check properly that you can pay. I know in my experience that the banks offer loans too easily and don't really go through what you spend on essentials properly etc before they give you a loan. I had one bank accept that I spemt £40 a month on food, if you make a financial agreement they will accept you spend £40 a week.

Consolidation Loans

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