Consolidation Loans?

katsplat1

Is a consolidation loan worth it?

I have an HSBC Visa card and o/draft and combined they are at about £5k. HSBC have asked me would I like to consolidate these with my personal loan.

I know the interest rates are better for the loan so is it a good idea to put all my eggs in one basket and pay off one combined debt?

lynzpower

Erm only if you are absolutely certain that you will not run up an overdraft or CCs again.

I thought it was a fantastic idea. until I ended up with the loan and the cards, and the overdraft all over again. Im certainly not the only one. Show me a DFW who has not been burned by some sort of "consolidation" and Ill show you a rarity.

Its that easier, more manageable bit that stings people. Me included.

Personally, I advise, a big fat NO.

Why dont you move them onto 0% or low LOB cards instead?

onestep

I can only back up Lynzpower - consolidation loans are pretty much always a bad idea. If your credit history is good enough for HSBC to be offering a loan, then you should be able to find a 0% or a LOB (life of balance) card as Lynz suggests.

onestep

CLAPTON

the important thing is whether you are now living within your income or whether you are increasing the amount on the CC and overdraft.

if you are steadily reducing the debts then it makes sense to look to reduce the interest you are still paying. I would look for good Life of Balance CC or 0% cards and transfer the debts before looking at a loan.

If you're not steadily reducing the debts then you should look first at reducing spending rather than tinkering with the interest rates

katsplat1

I've tried to move my credit card debt but I have been turned down for one card that I did apply for. I know continuous applications can have a worst effect on your Credit file. Are there any cards you can recommend? Except for my HSBC account/CC (which I have never missed a payment on and have always been good with) my credit rating is not good.

dinkylou

Dont do it! Dont do it! Dont do it!

After all, HSBC are not offering this for the good of their health! They know what normally happens when people consolidate.

Even if you did choose to get a loan - HSBC would not be the first people you should go to. They rely on loyal customers like yourself not shopping around for the best deals.

Agree with others, 0% or LOB card is the way forward. But dont forget to cut up all cards and dont spend on them.

whatamess_2

I can only say the same as onestep and lynz, have been burned by consolidating and its still smoldering now. :eek:
It depends on how self disiplined you can be, if you can cancel the overdraft and card maybe.
If you think `right my balance is clear I will now buy x-y on the card ` then no,no,no. It becomes a spiral downwards consolidate spend, consolidate spend before you know it somehow you are owing thousands but look round and think `what did i get for that money`
Messy

CLAPTON

sorry i'm a little confused.
do you have other debts or are the above the only ones?
why is your credit rating poor...have you defaulted on other loans in the past?

perhaps you would like to consider posting a full statement of affairs (SoA) so a more complete picture can be seen.
see this link for more details

http://forums.moneysavingexpert.com/showthread.html?t=107280

Tondella

the problem with consolidation loans (apart from the psychology of feeling like all your debts are cleared) is that although they offer a lower APR, it is often over a longer term. Find out if you can make overpayments to the loan without penalty, if you are not allowed to overpay then i would compare the length of the loan with the length of time it would take to settle your debts by snowballing http://www.whatsthecost.co.uk/snowball.aspx

Molanole

I have a consolidation loan with HSBC and you are not allowed to make over payments on it. You are also not allowed to pay it off early without incurring a two month interest charge.

PLEASE dont' do this unless you are ABSOLUTELY sure that you will not run up further debts. That is the trap we have all fallen into here. You consolidate, the interest gets front loaded, you rack up more debt but in the meantime have only made a few repayments on your loan, none of which really make a dent in the capital, only the front loaded interest, so you consolidate again, adding yet more interest and so it goes on.....

If you really really must get a consolidation loan then as another poster said I would certainly not go to HSBC. Look instead for a provider who will give you a flexible loan which allows overpayments and allows you to pay off early but this is not the ideal solution.

katsplat1

CLAPTON wrote:

sorry i'm a little confused.
do you have other debts or are the above the only ones?
why is your credit rating poor...have you defaulted on other loans in the past?

perhaps you would like to consider posting a full statement of affairs (SoA) so a more complete picture can be seen.
see this link for more details

http://forums.moneysavingexpert.com/showthread.html?t=107280

Hiya Clapton

I only have two credit cards in my name. One is HSBC which has a limit of £3500 but I'm up to about £2900 on it. The other one is Barclaycard which is £550 limit and I have about £330 on it. I will post my full SOA once I have worked it out but my bad credit rating is due to an ex going bankrupt after we split and although we had no joint accounts, we had a joint mortgage. I was in the process of buying him out when a charge was put on the house for debts he incurred after I left him. So apart from my HSBC stuff, I am actually pretty ok financially.

Hubby is another story altogether. I am waiting for our credit file to see just how bad he is. We've only been married 3 years and the stuff that went on in his past is just as shocking - not bankruptcy though thankfully!