Managing Personal Debt-Is consolidation always bad?

JBJ2004

Hi

I have two credit cards and one personal loan.

Credit card 1: Virgin. Limit is 2500 and I'm currently up to my limit. There is a balance transfer introductory rate on there which ends in April next year and approx 1500 of that balance is benefitting from this rate.

Credit card 2: Capital One-I took this out to improve my cedit rating but the rates on this are high. The limit is 1100 and the balance on this is currently 1000.

Personal Loan: Black Horse Finance-again high interest (22%) and the balance stands at 1800 for a loan taken out 7 months ago at 2000.

My credit rating is fair. No defaults or CCJs and all my payments are made up to date with no late payments but I'm struggling to pay the combined debt off. I was thinking of consoldiating all my debts but I'm very wary of shopping around due to the impact on my credit rating.

My question is should I consider a consolidation loan and if yes would Zopa consider my application given my credit rating. The site says don't apply if you have adverse credit or lots of maxed out cards-which I don't think I have on both counts.

Tixy

Hi and Welcome

I suspect you will not be able to get a very good interest rate on any consolidation loan. Although your say your credit rating is fair presumably nothing much has changed from when you took out your loan 7months ago when you were offered a loan rate of 22%.

Consolidation isn't always bad but it often does not work out well for people. It is usually better to address the cause of the debts (i.e the overspending) and to work on creating a managable budget that allows you to repay your loans.

Usually when people consolidate they take the debt over a longer period in order to reduce their monthly outgoings. This obviously leads to more interest being paid.

Before you go down this route have you worked out a detailed financial statement to see where you have overspent in the past and how much you can afford to repay given your income and expenses? This is a good template as it ensures you budget for everything (even items you don't pay every month) http://www.makesenseofcards.com/soacalc.html

If you post the results on here we may be able to suggest areas where you can save money by switching providers or cutting down which will allow you to pay more off your debts.

jamesd

Better to try either another 0% balance transfer or a long term low rate balance transfer card. That'll get you more flexibility without the relatively high initial charge Zopa makes on small loan sizes. Barclays has a card with life of balance rates and a tool that tells you whether it looks as though you would be accepted using a quotation search that won't have any significant effect on your credit score. Try that, see if it offers you a card with a good deal or not. Then perhaps move on to another card operated by MBNA (Virgin is one, many others). MBNA cards are preferable because they have low minimum payments and let you balance transfer into a current account, so you can clear overdrafts or loans with them.