What To Do

sonniemell

Hiya everybody

Right im in a bit of dilemma here and wondered if you can give me any advice what to do.

I bought my house with my b/friend 2 years ago and bought all my furniture and appliances from my catalogues and on my credit cards, I also have a loan with the bank which is £7000 over 5 years I have 3 years left on it .

I have been paying all minimum payments on everything except the loan which is £147 a month, I now owe about £18,000 thats with everything.

The situation I am in is that I wanted to pay the catalogues off first in order to make bigger payments to my credit cards, but everytime i made payments to my cards I was paying the catalogues off with them so that eventually I was consolidating everything to my cards, I still owe on the catelogues as well as the cards at this moment.

Here is the breakdown

LITTLEWOODS £611.08
LITTLEWOODS EXTRA £1,951.00
SIMPLY BE £172.82
EMPIRE STORES £283.49
ARGOS EDITIONS £666.25
NEXT £198.60
STUDIO £294.23
MASTERCARD £3,218.66 13.9%
VISA £5,800.00 19.1%
BANK LOAN NATWEST £5,000.00 8.2%

I am paying roughly about £750 a month for all these.

I have never defaulted on any of them.

Anyway I spoke to the Natwest today and asked about a loan to consolidate all these as all interest rates were different and I would prefer just paying 1 payment and one lot of interest.

They said that they could give me a £20,000 loan over 7 years at £304 a month, @ 7.1% fixed, which would cover everything and it would leave me with £340ish better off every month. She also said that if I had any spare money I could slam into the loan to bring it down quicker.

I am tempted to take out the loan but I would appreciate any feedback from anyone who is willing to give any.


Regards



Sonnie

dudleyboy

Hi there. Have you read this article on cheapest loans? - You may be able to get one at a lower rate of interest:

http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1099314935,42333,#UK

I'd also only recommend a consolidation loan if you can trust yourself not to use your CCs, etc during the period of repayment... otherwise you'll find your debts doubling as you pay off the big loan AND the cards too! You do have to be disciplined if you follow this route and resist all temptation.. it requires a completely different attitude towards money and spending which'll seem strange to begin with but become normality sooner than you'd expect.

Alternatively there are 0% and low interest "life of balance" transfers on CCs you could consider. You'll pay it off at the same rate but pay no or little interest... the downside being you won't get one single credit limit to cover your total debt... so you may still need to get a loan for the rest (but at least it's for less).

Whatever you decide it does require discipline not to clock up more debt. Far easier said than done but where there's a will there's a way.

Best of luck.

Pigeongirl

Hi! :j

Personally, I would say go for it. You will know exactly where your money is going and have a little extra each month.

Up until recently I had two fat overdrafts which I kept on using right up to the max because they were there and I knew I could. Even when I put money on them in an attempt to reduce the balance, I would make excuses to use the money so was effectively getting nowhere. :eek:

In the end I took out a £2000 loan to cover them because I never ever default on loans cos I know the s**t I would be in if I did. So now I can't make excuses cos the money HAS to be paid out and there is an end in sight (albeit 2 years away!). If I had have carried on as I was I am sure it would have been far longer than 2 years before I paid the overdrafts off, if ever.

I have now removed the overdraft facility from my accounts so I am not tempted to dip into them again and end up in a far worse situation. If you do take this loan then please make sure you DO NOT use the credit cards, catalogues etc again or you may get in big poo.

Hope this helps; it is only my opinion. I know a lot of people are against using debt to pay off debt but I have to say there is a place for it.

fairylights_2

The danger is that the rate they are offering you could be beaten. Check out https://www.whatsthecost.co.uk/snowball.aspx and tap in the loan details they are offering. See what interest you'll be paying back over that time - and then take a couple of percent off to see what the difference would be. If you've not missed payments, a credit card shuffle should theoretically be possible.

Consolidating loans are generally a no-no on here - unless you promise to cut up all your cards the minute the loan pays them off!

in*the*red_6

Pigeongirl wrote:

If you do take this loan then please make sure you DO NOT use the credit cards, catalogues etc again or you may get in big poo.

Hi there

One question I have is why do you need to borrow £20k if your debts are £18k? Is this to cover the redemption of your existing loan??

Also, can you be sure that you have altered your budget and spending habits enough not to take on ANY more credit in the next 7 YEARS? That's a long term commitment and as Pigeongirl says, if you do, you could end up with even more debt - what about when your car needs replacing etc, can you really cover for emergencies?

Just posing these questions. I think you need to look very carefully at your budgeting because consolidating debts doesn't help to change spending habits. I can see why it's appealing to be paying less out every month but you need to be sure before you go ahead.

It would probably help to post your State of Affairs (all incomings and outgoings) here - there are lots of experts at cutting budgets.

Good luck

sonniemell

Thank you all for your feedback.

I did think about getting 0% cards to cover the debt, but, I sat down after the Natwest preapproved me an airmiles mastercard and said that I could transfer the balance from another card. But the problem here is that I knew that their card would not cover even 1 of balances off the cards I have, and I thought well theyll only probably give me £1000 and then ill have an extra card to pay off in the long run, which I did not want. So I thought well I think the best solution here is to get a loan to pay everything all off.

I owe £18,466.35 all in, after verifying the amount of the existing loan I have with the bank.

The reason I was taking £20000 is it leaves with me £1,500, of which there are a few things that I need to take care of whilst i get rid of all my credit cards and close all my catalogues.

1) We decided although the Toyota Celica is 1990 its nearly 16 years old and still runs like a dream its getting old it needs a break master cylinder fitted, a full service and any work to pass its MOT and keep it running for at least another 3 years while we save for our next car (NO LOANS, NO CREDIT). We drive 50 miles a day round trip.

2) Our house is now complete apart from the kitchen, after working out the best way to update our existing kitchen we realised we could do it if we did the work ourselves by buying our units from ikea for about £1,000 (remember we already have all our appliances which is part of our main debt). To take out an £18,500 loan and not have the kitchen and the car taken care of we will be paying back over 7 years at 7.3% £23,511.60. To take out £20,000 over 7 years and have the kitchen and the car taken care of we will be paying back over 7 years at 7.3% £25,417,56, giving a difference of £1905.96.

But we will own a kitchen and have the car sorted for 3 years (maybe more) while we save for a new one.

3) All credit cards once paid off are getting closed down, and all catalogues closed.

2) Like I said before I am currently paying £750 a month on all cards, catalogues and loan thats without my other bills and mortgage, and if I was to take out this £20,000 loan, I will be paying £304 a month for 7 years, which will give me the ability to save.

So I think I will end up going for the loan, I have been approved by Natwest but I am going to see if Northern Rock can beat Natwest's quote as it stands Northern Rock interest rate is 5.8% for £20,000.


Regards



Sonnie

tigerlily

I'm sorry, I may be missing the point but surely adding to your debt by buying a new kitchen for over £1000 seems crazy to me!! If you owe £18000 then borrow £18000. You have said that alot of the reason you are in such debt is by buying so much new stuff for your house.....learn from this. It is not neccessary (I admit its very nice) to have new stuff when setting up home, I set up home 7 years ago and still have some of the stuff I was given by friends or bought second hand. Its been a case of replacing thinhgs with new as and when I can afford to.

queenofthedump

I only have two things to say- if you stop using all your cards and catalogues and stick to your budget rigidly for 7 years fine go for it.

2- "and we even had enough left for a holiday" !!!!!!!!!!!!!!!!!!!!!!

Do the maths if you continued to pay off everything via the snowball system how long would it take you and how much extra would be interest and how much more than £20,000 will the loan interest be ???? be honest will you really chuck spare cash at your loan ???


Ok sorry that was more than 3 things - i am very anti consolidation loans as I truly believe apart from my addiction to spending money I never had consolidating our loans debts and having a hoiday too put us in the situation we are in.


Good Luck and sorry if mny advice confuses you even more

queenofthedump

or if you will have so much extra can you pay the loan off in 5 years instead of 7

sanfrancisco

sonniemell wrote:

The reason I was taking £20000 is it leaves with me £1,500, of which there are a few things that I need to take care of whilst i get rid of all my credit cards and close all my catalogues.

NO NO NO...this is the reason why people should not get consolidation loans.

Have you worked out how much interest you will pay over the 7 years.

With all due respect you have not learnt any lessons from getting into debt and are a sure candidate for coming back here in two years time with 35k of debt.

I hope the kitchen makes you really happy.

CLAPTON

just some figures
20,000 at 7.3% over 7 years costs £304 a month
20,000 at 7.3% over 5 years costs £398 a month
20,000 at 7.3% over 3 years costs £620 a month

why not get a three year loan ....you can afford to pay £620 per month and who knows what can happen over 7 years...maybe you will want a family and want to stay at home or work part time; maybe one of you may lose a job who knows.