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  • FIRST POST
    • Erucsbo
    • By Erucsbo 15th Oct 16, 11:32 PM
    • 3Posts
    • 4Thanks
    Erucsbo
    Consolidation Loan Loop
    • #1
    • 15th Oct 16, 11:32 PM
    Consolidation Loan Loop 15th Oct 16 at 11:32 PM
    So over the years I've added up through one way or another a decent debt on credit cards.

    They are affordable as I have a good salary, I pay more than the minimum each month and I can still afford life but I really would like to just get rid of them once and for all.

    So basically I thought I'd apply for a loan to consolidate the cards into one loan and then just close the card accounts and have a 5 year loan that I can simply pay off.

    The problem is, I tried and failed to acquire a loan due to my existing financial owing as the computer decided that it would be more than the recommended level of borrowing. This is despite wanting the loan solely to pay off those other debts.

    So aside from paying off these cards over what seems like forever, what else can I do to just get a timeline at least on getting rid of them?

    Advise is appreciated.
Page 1
    • redux
    • By redux 16th Oct 16, 12:03 AM
    • 15,558 Posts
    • 18,362 Thanks
    redux
    • #2
    • 16th Oct 16, 12:03 AM
    • #2
    • 16th Oct 16, 12:03 AM
    If you went to the debt-free wannabe board and posted there, they would advise you that a consolidation loan might initially seem like a solution, but people can end up doing new spending on the cards as well, and the debt amount keeps increasing.

    What is really needed to start with is to analyse spending, and decide where cuts can be made. Plenty of people in that section will offer help.

    Once the balances are down a bit, it could be possible to use card balance transfer offers to reduce the interest, but again, keep the overall amount going down
    Last edited by redux; 16-10-2016 at 12:11 AM.
    • Pixie5740
    • By Pixie5740 16th Oct 16, 12:36 AM
    • 8,849 Posts
    • 11,857 Thanks
    Pixie5740
    • #3
    • 16th Oct 16, 12:36 AM
    • #3
    • 16th Oct 16, 12:36 AM
    Do you pay more than the minimum payments on all your credit cards or just the one with the highest APR? If it's the former stop doing that and start doing the latter. It's called snowballing.

    http://mobile.whatsthecost.com/snowball.aspx
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • Erucsbo
    • By Erucsbo 16th Oct 16, 8:48 AM
    • 3 Posts
    • 4 Thanks
    Erucsbo
    • #4
    • 16th Oct 16, 8:48 AM
    • #4
    • 16th Oct 16, 8:48 AM
    Currently all 4 I pay more than the minimum but I see what your saying. Perhaps I can tailor it towards paying the most on the !!!!!! APR one.

    I haven't used the cards in quite a while. I used them for work, staying for long periods in hotels etc and over the years it mounted up without giving it the right consideration. Now I have no reason to use them at all so I'd love to have em back and get my owing down again.
    • DCFC79
    • By DCFC79 16th Oct 16, 9:14 AM
    • 27,750 Posts
    • 17,524 Thanks
    DCFC79
    • #5
    • 16th Oct 16, 9:14 AM
    • #5
    • 16th Oct 16, 9:14 AM
    The lender will have no idea you will use the loan to pay the debts off, as far as they are concerned its extra debt for a car you want to buy for example.

    Reduce your spending and pay the cards with the highest apr off first.

    Why not make a start and close the card with the highest apr so you don't add to it.
    Last edited by DCFC79; 16-10-2016 at 3:56 PM.
    Je Suis Charlie
    • -taff
    • By -taff 16th Oct 16, 10:33 AM
    • 6,458 Posts
    • 3,731 Thanks
    -taff
    • #6
    • 16th Oct 16, 10:33 AM
    • #6
    • 16th Oct 16, 10:33 AM
    Go to the debt free wannbe board, post an SOA, because while you might have used them in the past, you may well be able to cut spending in other areas to pay more off more quickly. It's amazing what a fresh set of eyes on your budget can do.

    Another no vote for conslidation, it hardly ever works. It will only work if you cut up the cards and never spend on them again, and as it's already been said, you will struggle getting a loan because of your income to debit ratio.

    See if you can swap any of your cards to 0% deals, at least that way you'll cut dowon the interest you pay.
    • Ilona
    • By Ilona 16th Oct 16, 11:26 AM
    • 1,539 Posts
    • 5,658 Thanks
    Ilona
    • #7
    • 16th Oct 16, 11:26 AM
    • #7
    • 16th Oct 16, 11:26 AM
    You can't borrow your way out of debt. I suggest you cut your spending down to the minimum for a while, it will be painful, but then you can throw more at your debts and they will go down quicker. It's not rocket science. Spend less, earn more.

    Post up a Statement of Affairs on the Debt free Wannabee boards, and people will tell you where you might cut back on your spending.
    http://www.stoozing.com/calculator/soa.php

    Good luck.
    ilona
    I love skip diving
    • enthusiasticsaver
    • By enthusiasticsaver 16th Oct 16, 2:27 PM
    • 2,553 Posts
    • 4,365 Thanks
    enthusiasticsaver
    • #8
    • 16th Oct 16, 2:27 PM
    • #8
    • 16th Oct 16, 2:27 PM
    Two things.

    Consolidation loans do not work. Speak to anyone who has done it and you will find that it just delays people dealing with their money problems.

    You say you have a good salary and you can afford life and yet you still have debt outstanding on credit cards. Why is that?

    Once you have found the answer to the question above you will realise you are spending more each month than you have coming in and in spite of paying minimum payments (which probably does little to pay them off as they usually just cover interest if that) you are not reducing your debt.

    Post an soa and start keeping a spending diary and it will enlighten you as to where your money is going and how much of an overspend you have to deal with.

    No short fix to get rid of debt so you just need to start making overpayments (not just minimum) on credit cards and stop spending on them from today. Move them to 0% if you can and pay minimums on all but the highest charging card and make as higher payment as you can on that until it is paid off then close it. Carry on with all the others and when you get to 2 just keep those open and aim to get both to nil.
    Debt and mortgage free and saving for early retirement
    • Dobbibill
    • By Dobbibill 16th Oct 16, 3:35 PM
    • 1,710 Posts
    • 2,847 Thanks
    Dobbibill
    • #9
    • 16th Oct 16, 3:35 PM
    • #9
    • 16th Oct 16, 3:35 PM
    Another vote against consolidation here too.

    1- Snowballing is your first starting block.

    2- Followed swiftly by the DFW board with a SOA to cut the cost of 'life' down to the bare minimum.

    3- Back to the snowball calculator and see the difference the DFW board suggestions make, sometimes it can knock months off the end goal.

    4- Stick to your new budget.......this will be the hardest of all the steps but also the most rewarding in the end.

    There's no quick fix, the loan decline has probably been the best thing that could have happened for you (although you probably don't feel it is at the moment). All the best.
    • jonesMUFCforever
    • By jonesMUFCforever 16th Oct 16, 4:46 PM
    • 23,192 Posts
    • 10,538 Thanks
    jonesMUFCforever
    Reading between the lines - if you were spending on hotel expenses should your employer not have refunded the cost to you?
    What goes around - comes around
    give lots and you will always receive lots
    • Erucsbo
    • By Erucsbo 16th Oct 16, 6:35 PM
    • 3 Posts
    • 4 Thanks
    Erucsbo
    Appreciate all the advice guys. I'll forget the consolidation based on all the no votes here. I'll find out which APR is my worst and will shift all of my extra spends onto focusing on getting that one gone.
    In the meantime I'll check out the debt free forum section.

    Thanks for the advice again! Wasn't sure where to start after the loan was a no go . Blessing in disguise perhaps.
    • JP1978
    • By JP1978 23rd Oct 16, 2:14 PM
    • 58 Posts
    • 29 Thanks
    JP1978
    Ex partner and myself had a few debts many years ago. We took a consolidation loan to clear them BUT due to the severity, my parents took control of my/our finances so that we couldn't build up more debt nor spend money on stuff we wanted, only stuff we needed.

    Although that worked for us at the time, I know for sure that it wouldn't have worked if my parents didn't take control. We would just have seen we are paying x amount less per month (even though a longer period) and would have just spent that on crap.

    Fast forward to more recent times and current wife and myself have a few debts. We were going to clear them down from equity from a re-mortgage/house move - I was previously trying to service all debts. We have an overdraft each (circa 4k) and had about 4k on a credit card. I was trying to service all three and failing. Since taking an interest in these forums I realised my mistake. Three or four months ago, I changed tact to clearing as much as I can on the credit card. That is now at £1700, by the time we move and need to clear it as part of the mortgage terms, it should be about £1000. Snowballing is the better option. Its helped my sanity somewhat too - feels that we are starting to get control and once debt free, the savings on interest and charges will be considerable.
    • curty510
    • By curty510 24th Oct 16, 10:46 AM
    • 142 Posts
    • 292 Thanks
    curty510
    i was in a similar place a few years back, instead of paying over the minimum on all, i paid the minimum payments on all but the highest APR. I threw as much as I could at the debt with the highest APR, once that cleared i done this to the next one...with the first paid off i then had more money to pay the next and so on..

    It really didn't take long to pay them off this way.

    The decline in a consolidation loan has done you a favour to be honest, may not feel like it. But they do rarely work.

    Good luck.
    • superbigal36
    • By superbigal36 24th Oct 16, 6:23 PM
    • 597 Posts
    • 332 Thanks
    superbigal36
    You might find if you check your CCs that the available balance already has 0% balance transfer deals. If you can clear at least 1 card completely then often immediately that card will offer 0% and you can clear another etc.
    • morecambe.bae
    • By morecambe.bae 28th Oct 16, 12:48 PM
    • 27 Posts
    • 63 Thanks
    morecambe.bae
    I was in a 'loan loop' for ten years. I started out with a £1000 loan when I was 18 and I've been reconsolidating since then. I think a huge part of it for me was my OCD, I felt better having all the debt in one place where I could see it. But it just snowballed (reverse snowballed?!) and before I knew it I was age 27 and taking out a £7000 loan to consolidate.

    Don't do it, just buckle down and get them all paid off separately.
    Debt on 01/01/2015: £10,241.50
    Remaining debt as of 26/10/2016: £3,250
    Saying NOvember!
    • timbstoke
    • By timbstoke 1st Nov 16, 8:29 PM
    • 883 Posts
    • 1,126 Thanks
    timbstoke
    I'm going to be the voice of dissent here. Yes, snowballing is the most efficient way to pay off a number of cards. But that doesn't necessarily make it the right approach for everyone.

    Take me for example. I have a £1200 overdraft, a £1300 credit card, and a £2500 credit card. It's not a huge debt, and I'm on a decent enough salary. And yet I've been coasting along with these balances for at least the last 5 years. Why's that? Well, two reasons. The main one is that they don't affect my lifestyle enough for me to do anything about them with any urgency. I can afford the repayments and just keep plodding on.

    The second reason is a little more psychological in nature. Payday sees me clear my overdraft every month. That same week, all the bills are paid and a respectable payment towards the credit cards. That leaves me with a balance of less than £100 in my current account. Grocery shopping wipes that out, and the rest of the month sees me living on my overdraft.

    When your day to day expenses for the entire month are made up of borrowing, a couple of things happen. First, living on borrowed money becomes normal. Going into your overdraft is inevitable, so you (well, I) accept it with a kind of "Well, let's see if we can owe a bit less at the end of this month" attitude, and when you can afford to just coast, there's really no urgency to deal with it. Second, it's hard to get motivated to deal with it. Every time you look at your bank account, you're in the red. It makes it easy to take a 'head in the sand' approach, because you know you're not going to be refused money, but it's depressing to see negative numbers all the time. Third, when you're not particularly motivated to pay things off, you have disposable cash in three different places. Sure, you might be near your overdraft limit, but you have your card to fall back on. You're not actually exceeding your limit, so what's the problem?

    JP1978 above was fortunate enough to have parents to take control of his spending. I'm not that fortunate, so my approach now is to simply remove the temptation. I just took a £5000 consolidation loan to pay off and close both my cards and reset my overdraft to zero, with no need to fall back into it again. The loan is from the same provider as my current account and one card, so they're going to pay those off for me, close the accounts and remove the overdraft, and deposit the remainder for me to pay off my other card. It means I have an extra bill each month, but I'm fine with bills - it's disposable money that kills me every time. I can't 'reborrow' from a loan like I can with a credit card, so by allowing me to close my credit card accounts, it leaves me with a single bucket of money with a clear stopping point at £0, rather than £0 being this imaginary spending line that I'm inevitably going to go past because I can't even afford groceries otherwise.

    On the raw figures, I might be capable of clearing the cards for less than the interest on the loan. But I've been trying that for years and just coasting, so the time has come to simply remove it. A credit card is supposed to be a safety net, but when it's maxed out every month, it's not a safety net anymore, it's just a crutch. If you're the sort of person who will inevitable keep reborrowing from your card (like me), then moving to a loan might be the only way you'll ever actually get rid of that last bit of debt.
    Last edited by timbstoke; 01-11-2016 at 8:33 PM.
    • redux
    • By redux 2nd Nov 16, 3:50 AM
    • 15,558 Posts
    • 18,362 Thanks
    redux
    On the raw figures, I might be capable of clearing the cards for less than the interest on the loan. But I've been trying that for years and just coasting, so the time has come to simply remove it. A credit card is supposed to be a safety net, but when it's maxed out every month, it's not a safety net anymore, it's just a crutch. If you're the sort of person who will inevitable keep reborrowing from your card (like me), then moving to a loan might be the only way you'll ever actually get rid of that last bit of debt.
    Originally posted by timbstoke
    You've substituted the loan interest for the overdraft and credit card interest. This may be slightly cheaper, and let's hope so.

    But you'll now also be paying back a part of the principal each month, so the comments above that the best response is look at ways to moderate spending will still apply.
    • timbstoke
    • By timbstoke 2nd Nov 16, 8:36 AM
    • 883 Posts
    • 1,126 Thanks
    timbstoke
    The loan interest is lower than either card and the overdraft, so paying back the same amount each month will be cheaper. But for me at least, that's not the primary driver. I'm getting married next year, so this is about taking control of my money before it becomes a bigger issue, and clearing up my financial picture for both me and my fiancee. I want to:

    1. Regain clarity over my budget. When I show my fiancee my balance, she gets upset because it's invariably a negative number and she believes that means we're in a terrible position and can't afford anything for the rest of the month. At the same time, she sees the credit cards and believes that's money that we can spend on the wedding. A single bucket of money where we're working to zero instead of -£1200 means we can budget for the wedding without dealing with the extra complexity and stress of trying to simultaneously clear an overdraft.

    2. Remove the temptation to keep dipping into the cards. The cards are in good standing and will likely be offered an increased limit in March/April next year. That's just begging to be used up on wedding things with the promise that "we'll deal with it after the wedding", and that's not how I want to start married life.

    3. Actually clear the debt. A card is a rolling balance that you should really try to clear, but it's not like you've really got to, and those fancy wedding invitations are really nice. A loan is a simple fixed amount that means we're debt free in November 2019.

    Moderating spending is of course the only way to really address the debt, but doing so becomes a lot easier if you can simplify the budget a little.
    Last edited by timbstoke; 02-11-2016 at 8:40 AM.
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