What's wrong with consolidation?

JA1000

Does anyone know of an online calculator which can show over payment on cosolidation? snowball doesn't allow for this but gives an example of what can happen on a 5.5% mortgage over 25 years and what it will cost.

However, if for example you were paying back minimum payments across credit cards at 25% (ave) at a cost of £1000 pm and this is transferred to a mortgage at 4%, yes it will cost a lot more if it runs the term on min payment but what about continuing to pay £1000 which includes a significant overpayment.

Why is this not a better solution?

TMoose

Mathematically it is.

But
a) you now have secured that debt against your house, and run a higher risk of getting into trouble on your mortgage (as payments *will* be higher) and therefore losing your house.
b) you might run back up the credit card balances again, leading back to a).

Consolidation is only a good option if you are very disciplined (to not run up debt again) and many people who get into trouble on credit cards are by definition undisciplined.

Moose

MrsTinks

JA1000 wrote: »

Why is this not a better solution?

Apart from the securing an unsecured debt?

Hmmmm ask the hundreds if not thousands of us who've done the clever consolidating thing we were all oh so clever and we'd never do anything like that again... so...

And yet there's a lot of us here on the DFW board ain't there? Not saying everyone consolidated... but I did for one... twice I think... (not into a mortgage thankfully...

fatbelly

What's wrong with consolidation?

...it doesn't work!

MrsTinks

Actually I should have said that I at one point had nearly 22000 reasons for why it doesn't work :rotfl:

JA1000

I have 50000 reasons why I want to do it and it and it should be on the mortgage anyway if RBS hadn't gone t*ts up and panicked!!!! The discipline is there.

JA1000

fatbelly wrote: »

What's wrong with consolidation?

...it doesn't work!

That's just a quote and not mathematical proof against my theory.

*Jellie*

I think most people are against it because
1. They've done it and ended up back in debt. Quite often because they ended up consolidating because they were overspending but never addressed this or changed the habits. For many the long hard slog of getting debt free is needed to get into new habits and not end up in the same situation again
2. Fears of secured borrowing

As had been said if you are disciplined and it makes sense financially then it might be right for some. Personally I'd do everything I could to avoid it!

MrsTinks

JA1000 wrote: »

That's just a quote and not mathematical proof against my theory.

Well you asked and were answered

However - mathematically then no there is no calculator that I am aware off that will allow you variables of showing the costs etc if you overpay every month... The main difference is if you miss payments on your current unsecured debt then drat and darned it's a pain in the back side - you miss it on your mortgage and you're a LOT closer to loosing your home... remember your mortgage company doesn't have to go through getting a CCJ and a charging order on your house if you don't pay.
Can you be SURE that in the time it'll take you to repay the unsecured debts you won't end up struggling to repay the mortgage? Can you be SURE that you can overpay your mortgage? A lot don't allow you to... meaning you would need to put aside the savings and knock a lump off when you remortgage - do you have the dicipline to save and not touch?

richardvc

1. Because you are not out of debt - all you have changed is who you owe it to and this time they can take your house !!

2. It doesn't address the fact how you got into debt in the first place so if you do it again....go back to 1

BigCraigJohn

Have never done so with secured but ive consolodated for the last 12 years almost annually, you think you are doing right esp when banks tell you, you are. However when you have £20k of credit sat there doing nothing, that same instinct to overspend kicks in so unless you consolodate then cancel the previous source of debt you'll probably do it again.
Its like weightloss, unless you change old habits you'll put it all back on again.