What's wrong with consolidating?

climbgirl

mjh1977 wrote:

There seem to be two main reasons being given against consolidation loans this morning, and I'm not sure I'm convinced by either of them...

The first is that the consolidation loan becomes an extra loan, and not (by definition) a consolidation loan. I know how easy that is to do, but it's not an argument against consolidation loans per se

The second is that consolidation loans have to be paid off in the future, so are a bad idea because they limit your freedom. Surely if you've already got loans and cards outstanding they'd have to be paid off anyway, potentially at higher rates. Additionally, if it's cards you're using, presumably you're still able to carry on using them until you reach your limit, whereas a consolidation loan can be capped.

I'm not a consolidation loan salesman, by the way. It's a question of finding the right kind of loan that gives you the flexibility to cope if circumstances change, and of getting best value. To be honest, I think if you're going to carry on spending you're going to carry on spending, and that's kind of a separate issue from how best to manage existing debts.

Yes - if you can be disciplined and accept that you're locked into this for X number of years, consolidation loans can work. But only if the numbers stack up!

They reduce monthly payments (which is sometimes necessary for survival, as you so rightly point out!), but this does mean you will take longer to pay your loan, and it will therefore cost you more in the long run. Unless you have absurdly high APRs and can get a consolidation loan with a low one that will allow you to overpay and that doesn't frontload the interest. But that's rare because people who are looking for consolidation loans, tend not to have great credit records.

They tend to cost you more in the long run, more times than not (not always as explained above). That's the main argument against them in my book!

Queen.Bess

little_miss_broke wrote:

I only found this web-site myself on sunday and already i feel like my life has changed. Bizarre really, i haven't paid a penny off my debts yet, yet i feel in *control* of them now, as opposed to them controlling me.

I agree entirely! I've been on MSE nearly a month now and whilst my situation hasn't changed moneywise, I've taken control of it, taken advantage of balance transfers, closed old accounts and I know where I'm going! :j

So Good Luck Steve in London, we're all with you and together we can provide support, advise and lots of empathy!! :beer: