is a debt consolidation loan the answer?

one_hot_minute

Tixy wrote: »

Credit union loans tend to be for much smaller amounts than the £5k the OP is looking for (although I would agree its not unheard of for them to lend this figure - but up to around £1k is more common), also many credit unions want you to start saving with them for a few months before they will loan to you.
And credit unions are often not the most competative - with some charging the maximum they are allowed to of 2% per month.

There are two types of CU's tho, version 1 (community based) and version 2 (can offer products / services in line with what the banks offer)

If he can access a version 2 Credit Union their operational model is more like a small building society. Monthly interest tend to be around 1% per month (hence the 9.9% example, plucked from a CU loan calculator). OP if you PM me the area where you live and / or work, I'll find out if you can access a version 2 Credit Union. Where I live, I can access two big Credit Unions and their loan terms etc are far more favourable than banks with the ability to borrow within a few weeks and large secured and unsecured loans available if you meet their Credit and affordability checks.

My reasoning for a CU loan being better for the OP is that if he can get one with an interest rate to match his banks, once the £300 car loan is out the way, this can be fired into the pot to clear the loan quicker, saving overall interest paid compared to the bank loan.

I do urge you to speak to CAB or debt advice company first before making hasty decisions though and also if you do borrow, make sure you get the right agreement for your circs, whether it is bank / BS or CU.

samhuzz

one_hot_minute wrote: »

There are two types of CU's tho, version 1 (community based) and version 2 (can offer products / services in line with what the banks offer)

If he can access a version 2 Credit Union their operational model is more like a small building society. Monthly interest tend to be around 1% per month (hence the 9.9% example, plucked from a CU loan calculator). OP if you PM me the area where you live and / or work, I'll find out if you can access a version 2 Credit Union. Where I live, I can access two big Credit Unions and their loan terms etc are far more favourable than banks with the ability to borrow within a few weeks and large secured and unsecured loans available if you meet their Credit and affordability checks.

My reasoning for a CU loan being better for the OP is that if he can get one with an interest rate to match his banks, once the £300 car loan is out the way, this can be fired into the pot to clear the loan quicker, saving overall interest paid compared to the bank loan.

I do urge you to speak to CAB or debt advice company first before making hasty decisions though and also if you do borrow, make sure you get the right agreement for your circs, whether it is bank / BS or CU.

Hello

Sorry to take over the thread, but would a CU accept me? I currently have 8k of outstanding debt to 3 lenders and am paying it back at reduced payments (all are shown as defaulted on my credit file). I also have a CCJ (settled). I am currently paying approx £130 a month to these debts. I was just wondering if they'd accept me so I could consolidate these debts and start to build my credit back up as I am now in a position to pay a loan properly.

one_hot_minute

samhuzz wrote: »

Hello

Sorry to take over the thread, but would a CU accept me? I currently have 8k of outstanding debt to 3 lenders and am paying it back at reduced payments (all are shown as defaulted on my credit file). I also have a CCJ (settled). I am currently paying approx £130 a month to these debts. I was just wondering if they'd accept me so I could consolidate these debts and start to build my credit back up as I am now in a position to pay a loan properly.

They would accept you as a member to build savings (however, if you had a trust deed etc, this would be counted as an asset) I'd highly doubt they'd offer you a large loan though, due to the three defaults. Bearing in mind, every CU, like every bank has different scoring and affordability checks. A Credit Union would take reasonable steps to ensure the loan was in your best interests and to be honest, I dont think it would be here.

If you are in a position to pay an 8k loan, can you overpay towards your three defaulted loans? I'm not a financial adviser in any way, but personally, I dont think consolidating would help your circumstances, but make the situation worse. Just my opinion...sorry.

DVardysShadow

Dave75 wrote: »

...
If I understand it correctly with the loan consolidation issue is that i've lived a bit beyond my means and its finally catching up with me. If I got a loan at a decent rate, cut up my cards and never used them again then that is an acceptable solution? Its all about personal will power, if I start spending again on cards then the situation is just going to escalate. ...

Yes, it is catching up with you.The problem with the consolidation loan and cutting up the cards is that the loan puts you on a fixed schedule of repayment.

• If you set repayments too high you risk defaulting if you have an emergency spend [so keeping the debt on the cards does give you more wriggle room].
• If you set them too low, the debt takes forever to clear, but you end up with some surplus cash and feel free to take on more credit again

If you keep your debt where it is, it allows you to put everything to paying back but leaves you some scope to cope with an emergency. Some people actually keep a card frozen inside a block of ice in the freezer.

Dave75

Update:

I have spoke to various people regarding loans, and the my bank HBOS were quite unhelpful to be honest. They offered me 25% apr on 5K over 5 years, then said i'd be better with 7K then 10K, was put under some pressure. I then went somewhere else and got some good advice and am going to steer away from the loan route just now. I have got another 0% credit card and will transfer balances and close down the other cards bringing by total credit available down which is the only bad thing with my credit score. This route should minimize the intrest paid.

Thanks for the help.