The amazing shrinking debt!

burntfingers_2

dreamdreamer wrote: »

The consolidation loan does work for me purely because the APR is much better than any of my old debts, is a much shorter term, and forces me to pay a significant amount of my salary so that I can't fritter it and wind up paying minimum repayments/interest only. Genuinely curious as to why people seem so dead set against them. Lots of knowledgable people on here - I'm learning a lot!

I will try and shed some light on this for you.....

With a consol loan, it doesn't really learn people to stay within their budget.

If someone has a loan it clears all the debt there and then but as they haven't had to scrimp and scrape to do it then they are more likely to get into the same debt situation as before as they haven't learned any lessons.

It can often increase the debt that peeps have as interest is added on. Especially so if they have already been making reduced payments as most creditors will freeze interest and charges.

It increases peeps chance of getting further credit as seen as good credit score and often get bombarded with offers for credit cards etc.

Then if someone has an emergency ie boiler breaks down or car emergency and that person has no money to replace it, they will put it on a credit card with the intention of paying it off next month, then the next month comes by and another emergency comes along and before long the credit card is growing further and because they now have a loan and a credit card to pay then they start to struggle and its back into the overdraft. The overdraft then gets transferred onto a credit card and it all starts over again....it spirals out of control.

For some people, however it can be the right thing. If it consolidates ALL of the debt and that ALL credit cards are destroyed and not saved one 'for an emergency'.

It does mean no further credit until the debt is paid off. But people would have to have a cast iron determined will before it could work.

These are just my personal experiences and not only that something that I have heard it over and over again for the past 11 years. I am sure that most of the peeps that are on here have consolidated over the years and would say that they were okay until they consolidated.

Even worse, they consolidated it onto a secured loan against the property which is a great big NO NO. :eek:

Hope this helps although I am sure that other peeps will add onto the list.

Well done on tackling your debts. :T This is not a personal attack on you, please don't take it that way...:o

good luck

bf xx

dreamdreamer

Yeah since I wrote that when I first joined the board I have seen many many horror stories of consolidation loans that people have just used an excuse to run up the cards again. You're right - cast iron willpower and a drive to get rid of the debt is required. However I'm still not dead against them, because if you have the willpower, and can get a decent APR on a loan, it can save you a shedload in interest. Mine will have saved me about £4k in interest by my DFD in september (in comparison to how much interest I'd have paid to my DFD with original creditors).

Like most financial products on the market, if you use them the way they're designed to be used, they work. If you don't, you're screwed, and the banks sure as hell won't help!

ThomasCrocker

well done, you should be really proud of yourself

dreamdreamer

Get paid tomorrow but I won't be on here as I'm working. I'll be overpaying the loan by £400 tomorrow, then paying my regular £295 on the 25th (incl. interest), then another £400 on the 5th when I get OH's contribution to the house.

So since I'm not sure when I'll next be on I'll update now that as of the 5th my debt will be £2882. That's 81.8% paid!

dreamdreamer

Bit the bullet and applied for a first direct current account today after another Lloyds debacle!

dreamdreamer

Spending Analysis for April:

Monthly Income Details
Monthly income after tax................ 2053.99
Other income............................ 400
Total monthly income.................... 2453.99

Monthly Expense Details
Mortgage................................ 550
Council tax............................. 138
Electricity............................. 32
Gas..................................... 34
Water rates............................. 30
Mobile phone............................ 31
Groceries etc. ......................... 148
Other travel............................ 27
Contents insurance...................... 9
Entertainment........................... 112
New Bike................................ 150
Loan to Dad............................. 500
Loan Repayments......................... 695.15
Total monthly expenses.................. 2456.15

Monthly Budget Summary
Total monthly income.................... 2,453.99
Expenses (including HP & secured debts). 2,456.15
Amount short for making debt repayments. -2.16

As you can see, it's been a horrendously tight month thanks to the bike issue. Entertainment and grocery budget got slashed. OH has picked up most of the slack there, bless him. Bring on May!

saorsie

dreamdreamer wrote: »

Bit the bullet and applied for a first direct current account today after another Lloyds debacle!

Hope you get accepted Dreamer and that £100 will come in useful

-s-

dreamdreamer

Been accepted for a 1st account, got a big posh pack in the post yesterday, just posted off my signed forms etc. :dance:

I declined their offer of a 19.9% credit card!! No thanks. One of the reasons I've moved (other than that Lloyds are less than competent or pleasant) is so that I can use and abuse FD's regular saver account next year. Once the loan is paid off in September obviously.

Can't express how happy I am to be rid of bloody LLoyds TSB!! Been with them since I was 16. Hopefully I can start over with FD and get a reputation as the responsible saver that I want to be, rather than the financial mess that I was!

dreamdreamer

I was tempted by an amazing little car yesterday at the garage round the corner. £3500 and it'd cost me £45 a month in tax and insurance, and about £50 in petrol. I got home and was telling OH about it, who just looked at me like I was mental and said "But you've been busting a gut to pay OFF your loan - now you want to add to it?!" lol. That was all I needed to realise how idiotic that would be. It's good to have a voice of reason sometimes, I do get carried away!

dreamdreamer

I'm not liking this long gap between paydays - got paid on the 21st last month thanks to all the bank holidays, so it's been 2 weeks and I still have 3 weeks to go!

I now have £150 until payday, which is more than doable as I did a huge grocery shop on friday of last week that we're slowly munching through. Reckon we've got enough for another week and then it's OH's turn to pay for the groceries, which will hopefully see us to payday with maybe £20 of perishable stuff in the period. Also haven't got much planned socially, other than a gig on monday night but the ticket is paid for so it'll just be beer money (and at the student union so cheapo!). :beer: