What's wrong with consolidation?

JA1000

My current cc interest in nearly £1500pm the same amount on my mortgage would be £62. I am over paying on my cc to speed up repayment but this is still £18000 interest per year, slightly different to the £750 it would be if it was on my mortgage which is where it should be.

So repayment by overpaying would be complete in under 3 years. My credit card payments on minimum would run for 75 years.

Why in this situation would you not state that consolidation is right thing to do?

I think too many people on here get hung up over people bouncing from unsecured to secured debt and then it all going wrong and say consolidation is not right.

Of course it's not right if you carry on spending but there are people out there who shouldn't be associated with this.

What I am trying to prove is that Consolidation is not bad it is actually the quickest way out without being ripped off.

Raggs_2

In your case it does sound sensible. The numbers will almost certainly work.

However, you can overpay a mortgage, to my knowledge a lot of normal consolidation loans will have a fixed term, and overpayments/early payment comes with large penalties. Meaning unless you are only just keeping up with minimum repayments, which are very low (thus almost infinite lifetime), you generally stand a better chance of saving money by trying to clear the cc's as quick as possible, plus it gets you into better habits.

However, if your cc debt is due to your housing, and not lifestyle, then of course a lower interest, and equally overpayable, option is preferable. The only downside is it becoming secured debt, again, it becomes a matter of self discipline, and secure income.

Tixy

It might be the right decision for you JA1000

We just suggest to people that they should consider
1) what will happen when the base rate springs back up again - which it will, 0.5% base rate is totally unsustainable and once the election has happened who knows what will happen - do you remember the mid-teen base rates of only a few years ago - a lot of people who still have mortagages do remember those days.
2) what will happen if you lose your job/income through redundancy/ill health etc, will your house be more at risk? - the government scheme to assist with mortgage interest repayments won't help with the 'extra' amounts.

The other hardest thing (well the easiest thing to answer, the hardest thing to do) is to remain disciplined.
Trust me, I, like everyone, knew that I wouldn't be like those 'stupid people who run their debts back up again'. Typical of everyone the phrases in your head will be I'm too smart, I've done the maths, this one consolidation and I'll be okay etc etc. And you might be, for some it does work out.
But for many many people on DFW and everywhere they get used to their new consolidated repayments and then...
..a few months down the line maybe have a small emergency (the car needs a repair, the cooker breaks, the roof has a leak) - I'll put that on my card and pay back before the 56days are up.
..Next month 'oh shoot its freds' birthday, well I'll repay half the card this month and deffo pay off the rest next month.
..Next month, well the interest isn't that much and I really could do with a new TV, and its the new school term and both the kids need new trainers.. and I am still much better off than if I hadn't consolidated so I can afford it.....

Nobody thinks they'll get further into debt, but lets face it non of us thought we'd get into so much debt in the first place.

Of course your choice (if your mortgage lender will allow you to remortgage that it) but people generally go from their own experiences and many many on here wish they had never consolidated.

Mathmatically it will work, but life is full of twist and turns that Maths cannot always take into account.

Good luck whatever you decide.

JA1000

It was the twist and turns of the market which made me look at an uncomplete building site when RBS kindly pulled the plug.

I had to make the call to fight for funding, which now looking back would never have happened so I am glad I didn't waste my time. They were so scared of their own liquidity they blocked further lending.

I had no choice and reached for my empty credit cards, as I paid for supplies for the build to be finished I also did some swapping and had some running at 0%.

Although I maxed out the CCs at least I finished building the house, now I am looking to consolidate to where that money should really be, on the mortgage.

This is the reason why consolidation is NOT always a bad thing. Right now for the first time I am pouring money in to massive CC interest which leaves me unable to make signifcant payments of my mortgage.

wigannwuk

Its called an amortization table...the calculator your after...i have a spreadsheet if you want a copy??

yenool

The problem with consolidation is people will (for example) 'consolidate' 17k worth of unsecured debt into a 20k secured loan..... leaving a 'bit extra' for a holiday/car/home improvements etc. Then they will go back to what they were doing which got them into a bad situation in the first place, and a few years later they will have 30....40...50k. debt and consolidate again.

Eventually it all comes crashing down because the route cause has not been addressed (overspending) and then you find yourself in a situation where you cannot afford to pay credit card debts which are now secured against your home!

You also always end up paying more because the loan is over a longer period of time.
Bad, bad move.

JA1000

yenool wrote: »

The problem with consolidation is people will (for example) 'consolidate' 17k worth of unsecured debt into a 20k secured loan..... leaving a 'bit extra' for a holiday/car/home improvements etc. Then they will go back to what they were doing which got them into a bad situation in the first place, and a few years later they will have 30....40...50k. debt and consolidate again.

Eventually it all comes crashing down because the route cause has not been addressed (overspending) and then you find yourself in a situation where you cannot afford to pay credit card debts which are now secured against your home!

You also always end up paying more because the loan is over a longer period of time.
Bad, bad move.

Yet again someone who wants to tarnish debt consolidation as a bad move. I have proved in this thread that it would save tens of thousands.

The reason I have so much credit available on CC >£60k was because it was paid off. Had it not been for the market / RBS screwing up it would be on a mortgage anyway.

Debt consolidation is NOT a bad thing, it's like saying a mortgage is a bad thing and yet 99% of us out there probably wouldn't have a house without a mortgage so should we all save up to buy a house?

gonzo127

JA1000 wrote: »

Yet again someone who wants to tarnish debt consolidation as a bad move. I have proved in this thread that it would save tens of thousands.

The reason I have so much credit available on CC >£60k was because it was paid off. Had it not been for the market / RBS screwing up it would be on a mortgage anyway.

Debt consolidation is NOT a bad thing, it's like saying a mortgage is a bad thing and yet 99% of us out there probably wouldn't have a house without a mortgage so should we all save up to buy a house?

i think what most people are trying to say is consolidation is USUALLY not the best answer for MOST people, as some people have said it can work for some people however going on peoples experiances it usually ends up badly,

this is not saying the idea is wrong, and mathamatically for yourself it looks like a very good idea, however due to other peoples experiences we have found out that real life tends to give mathamatics a very heavy kick in the b*lls by throwing other things at us that are by definition un expected,

for example losing your job, in this extream situation which always has a possibility no matter what job you are doing, having consolidated your debts into a secured loan you run a much higher risk of losing your house, however in your situation the minimum payments on your consolidated loan might be payable on basic benifit especially if you are able to overpay the loan as much as you are saying you can, and this would be something i would suggest looking into before taking the risk.

as ever each situation needs to be looked at seperatly and all the risks need to be looked at.

i think the distinction needs to be made in that your debts have been run up not by overspending on everyday things but in a 'one off' situation, whereas most people who come onto these boards have run up the debts through over spending on everyday items and living beyond their means, and this is where consolidation is bad as it does not address the route cause of the debt

JA1000

I totally agree, but after reading these forums anyone in a similar situation to me could be under the impression that under no circumstances should you consolidate. There are people out there for whom it is the sensible way out and this point needs to be put across hence the thread.

Consolidation is NOT bad if used for the correct circumstances, I don't want those sensible people out there to be lulled into thinking it is bad. I couldn't find a thread to say it is ok to do and thought this cannot be right.

Some of the responses on here still clearly say it is a bad idea, well it isn't and each circumstance has to be looked at and not an immediate NO.

kilgore1080

I'm going to agree with JA1000, consolidation isn't always a bad thing. I was a couple of weeks away from being totally penniless and got a consolidation loan, paid everything off that I owed and have been overpaying the loan whenever I can. Admittedly I didn't secure the consolidation loan on a house but the principle is the same.

Whilst I do agree its not the right solution for everyone it does work for some but you HAVE to be disciplined and address the reasons you needed to consilidate otherwise, as others have said, the cycle may start all over again.