DMP v Debt consolidation

blossom36

Hello all...
I have begun the DMP process with the CCCS. Have sent my tokens and returned letters to the CCCS so await to hear from my creditors.
I am being telephoned regularly by MBNA who yesterday asked why had I not considered debt consolidation. I hadnt, but should I ? Will it protect my credit rating? I have equity in my house and until last month had very good history, so I might be able to get a loan. I would be looking at £25k over 15 years.
This has confused me and I couldnt sleep last night for wondering if debt consolidation is the answer for me. Any thoughts please?

Thank you

DVardysShadow

Dabt consolidation can do the job, but it is not usually recommended here.

• You are tied to an inflexible repayment schedule
• You have the cards paid off and free to use to start paying off the loan - this is the road to ruin.

If you do go down this road, make sure you don't consolidate debts with a lower APR.

I suggest you do a statement of affairs and take care to give full info on your debt - monthly minimums, APR and whether it is a loan or credit card.

gonzo127

as DC says debt consolidation is usually a bad idea

consolidation loans very rarely work and this is through personal experience and from the shear amount of people on these forums who started off with the idea that the consolidation loan would solve all their money problems and has ended up making it worse.

this is the general cycle consolidation loans tend to take

buy things you dont need/overspend on essentials/have a lot of emergencies so put everything on credit card
start to find hard to repay credit cards so get consolidation loan (majority of which have front loaded interest so your £25000 actually becomes £40000 as the interest that they charge you over the term of the loan is just added to the start of the loan so you do not catually end up paying any of the balance of until you have paid their interest)
have a short reprieve where payments become manageable again,
carry on buying things you dont need/overspending on essentials/have more emergenies/decide to 'treat yourself. put everything on your creditcards again
start to struggle with repayments look into consolidation again
get another loan which yet again is front loaded with interest for a much higher value than your first loan due to extra credit card spends and having to pay the interest on the first loan
rinse and repeat
untill finally credit drys up and the brown stuff really hits the fan when you realise just how much debt you have managed to get into

now i am not saying you would 100% garenteed to get into this cycle as there are people who manage not to, however a very large portion of people who come onto this site have been/are in this cycle and can agree how easy it is to fall into no matter how many good intentions you had at the start (personal experience coming into it here)


ALSO how long will your DMP take you? you have to think about this as well, your DMP will show on your credit history badly for 6 years after the initial default (usually within 6 months of the lower payments) however you are looking at a loan which will impact on your credit history for the next 15 years! and no matter what anyone says having £25000 as a loan on your credit file will impact your rating badly

anyways as stated if you can fill in your SOA we can help you go through your finances and we are usually able to spot areas in peoples life styles where savings can be made that they didnt realise,

blossom36

DVardysShadow wrote: »

Dabt consolidation can do the job, but it is not usually recommended here.

• You are tied to an inflexible repayment schedule
• You have the cards paid off and free to use to start paying off the loan - this is the road to ruin.

If you do go down this road, make sure you don't consolidate debts with a lower APR.

I suggest you do a statement of affairs and take care to give full info on your debt - monthly minimums, APR and whether it is a loan or credit card.

Thank you! I had not considered that some of my debt is actually a lower APR.
That one comment alone makes me see clearer.

blossom36

gonzo127 wrote: »

as DC says debt consolidation is usually a bad idea

ALSO how long will your DMP take you? you have to think about this as well, your DMP will show on your credit history badly for 6 years after the initial default (usually within 6 months of the lower payments) however you are looking at a loan which will impact on your credit history for the next 15 years! and no matter what anyone says having £25000 as a loan on your credit file will impact your rating badly

anyways as stated if you can fill in your SOA we can help you go through your finances and we are usually able to spot areas in peoples life styles where savings can be made that they didnt realise,

Thank you - I did a SOA back in Feb and decided to go with the DMP after lots of advice. I panicked when speaking to the MBNA last night who as well as using scare tactics. tried to sell me a consolidation loan....

gonzo127

well to be honest although totally unethical it is to be expected really, on a DMP they will only be getting back the original money the lent you since interest and charges are usually stopped, however if you take out a consolidation loan with them they will earn a shed load of interest over the term of the loan as stated you would probably find out that the actual amount you would pay on £25000 would be closer to £40000 so they would actually make £15000 from you