Consolidation loan a good idea?

petshopgirlemma

My OH has been offered a consolidation loan by HSBC. In short he has an overdraft with them of £1,900 and a mastercard £5,000. He also has a Barclays current account £1,250 overdrawn and a Barclays CC of £500.

HSBC have offered him a consolidation loan for the lot of it, paying back £200 a month at 14%. He currently works approx 40 hours per week (has 3 jobs all together), which can fluctuate as he works in term-time only jobs and in a theatre which goes dark over the summer, although he always has a guaranteed 24 hours week job.

We've tried applying for balance transfers elsewhere and the answer came back as a no for him, and Barclays keep saying there is nothing they can do to help.

Can he pay more than the set £200 a month with a consolidation loan, when he is earning more money? What happens if one month he can't pay the £200?

Is there a better solution?

I think the last balance transfer card he applied for was Virgin - and they just said no with no reason why. He's got a really good credit rating so we can't work out where he is going wrong.

Is it worth us taking the offer he has been given for a consolidation loan by HSBC to Barclays or another bank (I'm with Llodys TSB) and seeing if they will better it?

He's also got his student loans, but as he's not earing enough to have to pay them off we are taking them out of the equation for now. We don't have a mortgage or anything, just rent and the usual bills. He's by no means a big spender - he's actually quite frugal and the debts just stem back 8 years to when he was a student and he's never managed to pay them off - just been doing minumum payments. He had a graduate loan too which he cleared earlier this year.

Totyally unchartered water for me - I'm debt free!

skintandscared_2

no, no, no, no......

83% of people who take out consolidation loans end up reusing their credit cards. DON'T DO IT!!! :eek: You may also find that the rate on the consolidation loan is actually higher than the cards or the overdrafts and you end up paying a lot more overall.

The best thing to do would be complete a statement of affairs (all income and outgoings) and see if there's anywhere you could make savings, and actually see in front of you how much you can put towards paying off these debts without getting FURTHER into debt!! There is a really useful thing called a snowball calculator where you put in the total debts, and APRs, and how much you can put towards your debts every month. It tells you exactly how much to pay to which debts each month to pay the debts off fastest.

I'm sorry, I don't have links to either of these but there are lots of helpful MSE'ers on here who I'm sure can point you in the right direction.

D&DD

This is a question asked many tmes on here and there is no easy answer..
I'm one of the been there done that *4 times before* club
Many of us on here are wary for just this reason,consolidate,rack up the cards again,consolidate again its often a vicious circle UNTIL you get your spending under control...
However I also think under the right circumstances and with the right plans in place a consolidation loan CAN work..I'll explain why.

We had the same problem when we came here as you can see from my sig.All this started with a car loan for £5k..We got a loan,carried on overspending etc etc
When we found MSE we spent nearly 6 months sorting out our finances until we got to a point where our budget was actually within our means,we changed cards around etc but we couldn't get our outstanding balances down because of the high interest rates on our remaining cards (think they were 26 and 17% :eek:
By now we were confident our spending was under control,our cards were shredded and we approached our bank for *yet another* consolidation loan BUT...and its a big but the interest rate was 6.9% thus saving us a fortune in interest payments and we also KEPT the payments at what we were paying on the cards so it made 24 payments to be debtfree rather than 16 years !!!
It won't work unless you are totally committed but just wanted to put 'the other side' to the story
HTH
D