Why are people so negative about consolidation loans?

iolanthe07

The danger with consolidation is that it presents you with the illusion that you have paid off debt, when in reality you have taken on a lot more, usually at a higher interest rate. Consolidating unsecured borrowing on your house (which is what some people seem to do quite nonchantly) is absolute madness, imho. Better to do without for a while and pay off what you already owe.

euronorris

I went down the consolidation route several times. Including a couple where I had a couple grand spare.

Look at my signature. Clearly consolidation was not the right move and I'm now doing things the 'hard way' and will be debt free sooner.

Do you really need that extra couple grand? I mean, really, really need it? If not, why would you want to increase your debt level by that much for no particular reason?

immoral_angeluk

Spend long enough on these boards and you start to see patterns. One of them is that people who have had consolidation loans usually end up in a far worse mess later on because of them.

MarsdenCuckoo

I still maintain that if you know what you are doing then consolidation loans can be helpful in certain circumstances but generally they're not for the "short-sighted uninitiated". Far better to cut your expenditure to 1p (!) below your income rather than extend your indebtedness but if it helps keep your home then..... In a nutshell, they give you breathing space - just don't take tooooo much (or assume it's an excuse to overspend even more! :eek: )

woody01

People don't like consolidation loans for one incredibly simple reason.

It's someone in debt, getting into more debt to pay the original creditor.

nomoneytoday

Generally snowball, not consolidate.

UNLESS the APR is lower, term is shorter and there are no redemption fees!

triticale

immoral_angeluk wrote: »

Spend long enough on these boards and you start to see patterns. One of them is that people who have had consolidation loans usually end up in a far worse mess later on because of them.

I was one of them! Ended up an overwhelming nightmare at one point. Had to completely rethink every aspect of my income and outgoings and am now comfortably budgeting with the end of debt in clear sight.

I think the early days of being bombarded by all those 'consolidate ALL your existing debts with one SIMPLE monthly payment - and have enough left for a nice holiday!!!' adverts tainted a lot of people's ability to think rationally, and left us thinking it was the answer to debt problems.

It most certainly isn't.

27col

Well said triticale. How can more debt ever be the answer to debt problems. The only way is to reduce spending and gaining a surplus of cash to reduce the debts.

dizzyblonde82

I have consolidated my debts twice by taking out loans and am yet again in £16,000 of debt! This time me and my husband looked at a loan but decided against it as if we change our habits now we can be debt free in just under 2 years whereas with the loan it would have been over 4/5 years and paying lots of interest on top of what we actually owe.

This time in 2 years we will have £650 a month to do what ever we want to and have the bonus that we will have learnt to budget

GEEGEE8

That's one of the reasons I got into the state I did.. (bankruptcy)
A lack of money management, consolidation loads, carry on spending on credit cards etc.. it's a downwards spiral.
You prob can't get a loan because no-one wants to take on the whole of the debt, as I'm guessing it's split between a few lenders currently?
Make a plan about paying it off asap and try to do your best.