To Consolidate or Not to Consolidate? SOA added...

pnq06

I have just come home from the bank and they are offering what seems like a chance in a lifetime to pay off our loan and overdraft so we have only 1 monthly payment BUT it will cost us an extra £30 a month which would leave us with £230 for the month between 2 adults and a baby after all our bills except food/travel etc. have been paid...

Basically we have a loan with nationwide- £214.17pm 7.9%
and our lloyds overdraft which is always £3000 in the red and have never managed to make anything other than interest payments on..

We have failed several credit checks in the past so we can't get a CC on 0%
So basically lloyds have offered us £14,150.00 to clear both and we pay back £288.17pm at 18.7%

Can someone tell me what I should be looking for when consolidating please? I can't see past getting rid of the dreaded OD at the moment!!!

Thanks

**Amy**

:hello:

Firstly I think the general consensus on here is DO NOT consolodate. It will, as you have said, cost you more money in the long run, which really isnt helpful to you or your family.

Have you posted an SOA on here? This might be an option so that we can see what your debts are, your income etc. and try and give you some advice that way?

http://www.makesenseofcards.com/soacalc.html

Hope this helps.

x

**Amy**

Oh and re: the OD, would it not be best to try and treat that like a debt, and pay off a set amount a month (£10/20 etc.). Budget for it, and then forget about it, that way you will be paying it off?

x

rayday2

Eek that is expensive! And not leaving yourself much to live on if prices keep going up.

rayday2

Hang on if you are not managing now and they are going to take an extra £30 off you and at that interest rate - how will you manage in the future?

davetrousers

18.7% , No F#*$king way!

rayday2

If you can't cut back any further I would take advice from a debt charity and I sincerely wished I had asked the very question you ask today just before I signed my consolidation loan with first plus at a nice interest rate of 8% that in two years went up to 10.8% I think at its worst.

You are being wise to ask but please do listen before signing.

tyllwyd

Why would you change a loan from 7.9% to 18.7%?? That seems like a terrible deal to me - even if it is over a longer time, I'd guess that the increase in interest would mean that you'd end up paying out pretty much the same every month.

So if you can't get a better deal on the loan, you need to look at the overdraft. What is the interest rate on that? If you can come up with your extra £30 per month, and use that towards your overdraft, at least you'd be chipping away at it.

I think if you can manage to stick to a really tight budget and gradually pay off the overdraft, that is going to be a more flexible option for you. The only danger is if the bank suddenly decided to withdraw the overdraft at short notice - what bank are you with?

davetrousers

rayday2 wrote: »

If you can't cut back any further I would take advice from a debt charity .

Note: A debt Charity not a debt company. The charity (eg cccs) will help, a company will seek to make money out of you!

JimmyTheWig

NO WAY!
Don't do it.

I can't see any benefit to doing this.

Unless the overdraft is really that much of a problem.
Are you over your overdraft limit?
Are you getting horrendous charges on it?
Are the bank trying to cancel your overdraft facility?

Potential advantages of consolidation are...
1. Reduce the amount of interest / charges you are paying each month.
2. Reduce the amount of money you are paying out each month.
3. Reduce the hassle factor of having multiple debts and multiple payment dates, etc, that you find hard to meet.

But I don't see how any of these, really, apply here.
I don't know what interest rate you're paying on your overdraft, but in general the important thing is the interest rate of the biggest loan. And this is more than DOUBLING if you consolidate.
Your monthly repayments would go UP.
You only have two debts, so from a reorganisation point of view there's not much to be gained.

Yes, you need to do something about your overdraft. Either increase your incomings or reduce your outgoings (or both). Post an SOA here if you want help with this.
But this is not the way to do it.

pnq06

I really don't know what to do for the best... I would like to take it to clear the OD which is our main worry as we never know what it'll cost and is usually around £50pm :eek: But its ties us into another 7 years of debt :eek:

We have tried chipping away at it before but there is always something which is needed :rolleyes: But looking at it now, I guess we could pay £50(ish) interest each month and £20 towards clearing it... It just sounds like so much money when I look at it that way... Arghhhhh I hate having debts!!!

Is that the only way it can be done bearing in mind that we cannot get credit anywhere because of it

Unfortunately we can't cut back any more than we already have