Bigger loan to cover smaller loan?

Jonnafun

Hi

I'm thinking of taking out a bigger loan to [sort of] consolidate my debts. I have a debt of around £7000 of which I missed a couple of payments and now it has given me a poor credit rating. I want to get a bigger loan, to pay off that debt (hopefully giving me a better credit rating), and to pay off some smaller debts owed to family and friends, and some to outstanding council taxes.

I would also like to put what's left of that loan into a savings account, to pay for upcoming holidays etc.

Is this a good idea? Or am I just getting carried away?

Thanks
Jonnafun

_Andy_

The latter.
In any case with missed payments I doubt you'll find any lender offering you decent rates.

clairbear1000

If you have missed payments then you will struggle to get a consolidation loan, as the lender will look at your credit history as well as your debt to salary ratio. They can't know you will consolidate your debts so it will look like you will have two loans outstanding. In their eyes you will be over-committing yourself.

Aside from this you would need to make sure you could pay off your first loan early, the penalties may not make it a viable option.

Either way, you need to think long and hard at this, as consolidation isn't usually the way.

theoretica

Have you read many of the stories on the debt-free wannabee board here? There are some chilling examples of finances which started a bit wrong (as yours are now) and continued getting worse. Forgive me, but it does not sound like you can afford a holiday.