Getting a loan to consolidate my debts

hollow-point

Hi. This is my first post here. I am thinking of getting an unsecured loan from the Halifax bank(who I bank with) of 2000 pound spread over a year to pay off my 1400 pound credit card and 600 pound over draft. I have had these since I qualified from college 2 years ago and they are not going anywhere fast. I am being charged roughly 25-30puonds per month on my over draft with the Halifax and about 19% on my credit card plus the insurance. Does this loan sound like a good idea? This way a set amount will be coming out every month for a year plus I might be able to put a bit away in to a savings account to. I am still living at home with my parents but at 25 I'm hoping to move out in a few years and I would need bit of savings to do so. Any suggestions welcome. I know 2000 doesn't sound a lot but because they don't seem to be going anywhere fast I am beginning to lose sleep over it as my parents are wanting to sell there house and move abroad soon and I'm worried I will still be in this position then if I don't do something about it now

Many thanks for looking

David

Nottoobadyet

The general consensus on this board is that consolidation usually doesn't work. Is the reason your debt is still there really because of interest, or because you are spending too much? I suspect its closer to the later. Many people here have consolidated, then ended up spending back on their overdrafts and CCs once space is available - then there is that to pay on top of the loan.

Why haven't you been able to pay this relatively small amount off while living with your parents?

NeverAgain_2

You mention 19% on the credit card plus insurance.

The interest rate is too high, and the insurance is almost certainly a waste of money.

If you qualify, one way to deal with this would be a 0% introductory offer credit card.

You might be able to transfer the balance, and/or use the card for day to day spending for a few months, effectively moving your overdraft onto it.

But you still have to find the spare cash to pay off the £2,000.

The 0% offer will only last for a year or so.

Ideally you should pay off the £2,000 in that time, or at least most of it.

This will mean repayments of £150 - £175 a month.

CLAPTON

how much do you earn?
one would think that living at home with parents would be reasonably cheap
post up an SOA and let us see where the money goes
.. http://www.makesenseofcards.com/soacalc.html

hollow-point

I earn just over 900 pounds per month. My travel to work is a hundred and twenty pounds, my board to my parents is a hundred pounds and I have a phone contract which is 40 pounds. I then get charged 30 pounds a month for my over draft and my minimium card payment is 50 pounds. In the first year at work I had to buy tools for work and I wasn't paying back as much as I should have, sometimes even buying the more expensive equipment on there. My card went upto nearly three grand. Im now back to 1400 hundred and my over draft is lower than it ever has been but I just want to see a my account out of the negative and get rid of the rest of the debt. I'm not sure if I would qualify for a 0% credit card or not

dreamdreamer

Well, that's £340 a month of expenses you've listed (including your current debt repayments), where is the other £560 a month going? Why could the tools not have been bought with that extra income? I'm not trying to be harsh, but theses are question you need to be asking yourself to get a handle on where the problem actually lies. I suggest using the link above to complete an SOA to check there's nothing you've forgotten (easily done - you haven't accounted for any food, going out, etc etc), and keeping a spending diary to track where all the excess money is going.

I'm one of the few who thinks debt consolidation CAN work with a small minority, and when used correctly. However I think you're about to fall straight into the consolidation debt trap, because you haven't fully got a handle on where your money is going or why you incurred the debt in the first place.

Work out where that £560 is going, and then put as much as you can toward your current debts, you could have them paid off in far less than a year.

stqueen

Hi hollow-point,

From your workings above, it seems you have £640 per month remaining after you have got yourself to work, paid board and your phone contract. Allowing for things such as food (if you buy your own, you don't say whether that is mentioned in your board) etc, it seems you have more than enough surplus to pay back your overdraft and credit card without having to consolidate.

Are there any other monthly outgoings that you have, that you havent mentioned? If the answer is no, I strongly advise you to look at knuckling down and using your monthly surplus to hammer the debt without taking out more debt.

stqueen

dreamdreamer - double post!

hollow-point

I know exactly how I got into this mess. I spent money I didn't have as a student and buried my head in the sand. Then I put things on the credit card I should have saved to buy. I started off on minimum wage and it is slowly going up so I haven't always had 560 pounds left over after I have paid everything. I have reduced the amount I have been going out and also buying food to make pack lunches instead of buying a sandwich from sandwich shop. I now want to find a way out of. Paying 30 a month on my over draft and the mimum card payment plus insurance when it could be together. If I could put it on a card at a lower rate and set up a standing order to pay it could that be an idea. I have been temped apply for a card with lower rate but I always worry about being refused and it being on my record

wherediditallgothen

Don't consolidate unless you are sure you will be able to adapt your spending habits. Otherwise, essentially you'll just be adding a loan onto what you already owe. Which is absolutely no fun at all.

Clarie_2

Putting it on a card with a lower rate and setting up a standing order sounds like a great idea (as long as you never ever use the card again!). It's better than a loan because it's more flexible - as you earn more, you can up your standing order and bring your Debt Free Day nearer.
Clarie