Need to consolidate Credit Card debts - is a Loan the best way.

Ozhelp · 5 July 2017 at 2:43PM

I seem to have amounted a total of £12k on my two credit cards and despite trying to make the most of balance transfer 0% rates I now seem to be paying £60 interest on one credit card with the other 0% credit card ending in a couple of months. I always make the minimum payments but with the interest it doesn't seem to be doing much to the total. Due to the amount on my credit cards I am thinking about taking out a loan, it will stretch me but at least I know how much will be coming out and how often. I don't think I would get a 0% for the full amount and the cost of transferring it seems to be about the same as the loan. Any advice would be much appreciated.
Thank you

sourcrates · 5 July 2017 at 3:01PM

Hi,

Welcome to MSE.

The usual course of events when people can't afford there debt repayments is, first, to do balance transfers, next come consolidation loans.

Some people may consolidate there debt numerous times, until the penny drops that it dosent always work, and then they seek a debt soloution instead, either debt management or other insolvency option.

Do you see where I'm going with this ?

StopIt · 5 July 2017 at 3:10PM

Ozhelp wrote: »

I seem to have amounted a total of £12k on my two credit cards and despite trying to make the most of balance transfer 0% rates I now seem to be paying £60 interest on one credit card with the other 0% credit card ending in a couple of months. I always make the minimum payments but with the interest it doesn't seem to be doing much to the total. Due to the amount on my credit cards I am thinking about taking out a loan, it will stretch me but at least I know how much will be coming out and how often. I don't think I would get a 0% for the full amount and the cost of transferring it seems to be about the same as the loan. Any advice would be much appreciated.
Thank you

So a consolidation loan will stretch your finances, and for how long?

A few questions:

1: Do you have an emergency fund?

2: Are you aware that debt consolidation loans are usually at the sub-prime end so may be at a high rate of interest?

3: Why are you in £12k of CC debt? If you're simply living beyond your means have you addressed this?

Read the stickies, post up an SOA and try to address this without further borrowing.

EssexHebridean · 5 July 2017 at 5:00PM

You don't need a loan - you need a budget and to start paying off more than the minimum payment on the cards.

You say you "seem to have" got to the total of 12k debt - which I'm afraid suggests that you don't know how much you're spending each month are are currently using credit as a way of living a more extravagant lifestyle than you can afford. A budget will mean you start living within your means, and paying more than the minimum off the cards means you WILL start making an impact on the balance.

use the SOA calculator on here (link in the sticky post the top of the board) and get your financial house in order. If you would like to post it into here then we can take a look, advise where you can trim your spending etc. You need to start living on your own money not borrowing from elsewhere though.

Ozhelp · 5 July 2017 at 5:42PM

It has been a number of things including wedding, kids, car payments and to a certain extent living beyond my means which I am addressing - I can feel the animosity coming off some of your replies and believe me I intend to pay every penny back. I am just looking for the best way of doing this and wanted some advice.

I am looking to consolidate the amount I owe and thought the loan would be the best way so I know exactly how much I have to pay and for how long with the 0% ending soon. I would not take a loan that I couldn't afford to pay, I will just have to make sure that I stick to my budget - trust me this has been a wake up call. I just wanted to find out if my idea of the loan would be the best way.

Thank you for your feedback.

-taff · 5 July 2017 at 5:53PM

You're imagining the animosity.

No one cares if you pay your debts or not, they are worried that by using a consolidation loan you are neither noticing the xource of your debts, nor would be able to afford the repayments eventually.

The usual scenario is, [and it has happened to nearly every poster on this board, including me, which is why they and I am warning you against it]

you borrow money by spending a bit more on a credit card
Then you only pay minimum payments, which makes the debt go up [repeat this excercise with several cards if necessary]
Transfer money to 0% credit card. Pay minimum payments.
Meanwhile, take out new card, start spending on it....
See above...
Get a conslidation loan because it would be so much easier to only have one payment going out...
Pay off cards
Keep cards open, start spending on cards....
See above

This what usually happens unless the person involved starts to tackle what made them spend in the first place.

The solutions are always

Learn to budget properly
Live within your means

Not one person on this board will attack you for being in debt [unless it's a troll, in which case, totally gonore them]
You will get replies to tell you how to get out of it.
It's up to you whether you listen or not

Silver_Queen · 5 July 2017 at 8:26PM

I may be missing a trick but can't you just sit down and work out how much you're paying each month, to find out how much you're paying each month, which seems to be a big reason why you want to get the loan? I don't mean to be rude but it seems like a straightforward solution to me. At the end of the day it's your choice whether to consolidate but generally it doesn't work. If you are very disciplined and don't spend on the cards again, it could work. Only you know yourself well enough but there are many horror stories so if you decide to take the plunge make sure you do it with your eyes wide open.

Silver_Queen · 5 July 2017 at 8:27PM

Or, alternatively, are you still being offered 0% deals? You could see if you could do a balance transfer.

DCFC79 · 5 July 2017 at 8:34PM

Ozhelp wrote: »

It has been a number of things including wedding, kids, car payments and to a certain extent living beyond my means which I am addressing - I can feel the animosity coming off some of your replies and believe me I intend to pay every penny back. I am just looking for the best way of doing this and wanted some advice.

I am looking to consolidate the amount I owe and thought the loan would be the best way so I know exactly how much I have to pay and for how long with the 0% ending soon. I would not take a loan that I couldn't afford to pay, I will just have to make sure that I stick to my budget - trust me this has been a wake up call. I just wanted to find out if my idea of the loan would be the best way.

Thank you for your feedback.

I cant see you will get a loan.

You need to look at your spending, maybe a dmp is an option, other posters on here can advise what your options are.

middleclassbutpoor · 5 July 2017 at 9:27PM

Not sure going for a DMP is something to be considered.

Need to so a SOA to understand income/expenditure which if the OP wants to do then more help can be given.

Consolidating is a bad idea as i have learned. You will consolidate, create a bit of breathing space, get increase in pay, feel you can afford a bit more. The best advice has been given already in that you should forget what you think is the right course for the time being and explore whether you can get your budget sorted.

If you could prove that you have the underlying issue sorted, then possibly (but unlikely) you may want to consider a loan. As you reduce the balance, you will find 0% transfers will open up etc.

enthusiasticsaver · 6 July 2017 at 12:10AM

Consolidating is a bad idea. The reason why your debt is not decreasing is because you are only paying minimums. If you are struggling with this then an expensive loan will make matters worse. You are unlikely to get a good rate if you are overcommitted.

The best way to get yourself out of debt is to look at your spending, set a budget and stick to it. Ditch the credit cards, get into the savings habit, first for emergencies and for things like annual bills, holidays, car expenses, Christmas etc. Anything you would normally stick on a credit card start to budget and save for in the future. £12k debt is manageable. Taking out a loan is a sure way of delaying the inevitable which is to live within your income.

Good luck.

Need to consolidate Credit Card debts - is a Loan the best way.

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