(Newbie) Consolidation - good idea?

bellehc

Hi everyone
(First, sorry for the epic post!)
I've lurked around and read some really interesting and good advice from these forums. I'm recently feeling more and more overwhelmed with the pressures of debt and wanted to see if any of you have advice for me?

I'm now 29, and got into debt when I bought a car in 2001 - taking a loan through Nissan and getting an Egg credit card at the time with a limit of £1000 (+ living beyond my means at age 19!). I still have the little Micra 10 years on because things have spiralled since then!
I now have debts of around £16k with 5 cards (Cap One, Barclaycard, Mint, Natwest, Egg) having done various transfers etc over the years and not really clearing them. However, I now earn £40k p.a., and I've estimated I can clear these by 2015 (perhaps earlier depending on outgoings).
I got married in September 2010, and thoughts are turning to buying a house (seems near impossible) and starting a family. My husband is paying off an overdraft and CC worth about £3k and estimates to be paid by 2013. We have about £600 interest-free overdraft on our joint account (Natwest) which we are sometimes in depending on monthly outgoings.

So apart from being short of cash for saving etc, I'm just finding it hard to deal with the fact it's going to take so long to clear all this and feel that we can't even begin to consider saving for a mortgage deposit or having children for about 5 years. I've started really feeling the guilts about the whole thing and beating myself up/getting down about it.

I recently applied for a joint loan with Tesco to clear £18k into a single loan paying off over 24 months - I know we can afford the repayments and be clear in a shorter time, but it was rejected. (I need to call them and check why). Which is annoying!
I am currently updating Experian with my new name etc since marriage as I think this could be affecting it - ??

Any advice on whether to use a Snowball calculator and keep the 5 cards until paid off, or should we be looking to consolidate into a loan? Or is there another way to get things clear faster?
Thanks
x

Tixy

Hi and welcome

I expect the reason you were rejected is down to the amount of credit/debt you already have.

The way a potential new lender assesses you is can you afford all your current commitments and the new loan they would give you. As they cannot force you to use the money to consolidate they look at the worse case scenario that you blow all the new money as well.

Then then compare this total to your salary. As a guide most people are generally struggling to get new credit that means their total credit (including any unused credit on cards etc) is more than 50% of their income.

Thats as to why you were probably rejected. As for whether you should consolidate or stick with what you have now, generally people on here don't recommend consolidation, as for all too many people they get used to having less outgoings and run up more debts again (everyone thinks they won't do this of course at the time).

What APRs are you currently paying on all your cards? Have you tried instead of a consolidation to see whther you could get a 0% credit card or low life of balance deal on a card?
Do your APRs vary a lot? If so can you balance transfer or slow stooze from an expensive card to a cheaper one?

Perhaps if you could list the balance, APR and limit for each card people could advise if there is anything you can do to cut these costs.

bellehc

Thanks Tixy!

With regard to the consolidation and running up more debt - because I am spending around £750 on credit card payments per month, I can commit to pay the same off a loan which means I can clear it quicker (loan calculators tell me 24 months), so I wouldn't have lower outgoings and be able to run up more debt. Being cynical, does that mean a lender wouldn't "like" me because I won't be earning them as much in interest...

I don't have all the APR etc details with me, but I'll post this tonight or tomorrow for more help. I'll have to look up the stoozing thing again, forgotten what that is!
x

Tixy

I understand what you are saying about continuing to pay off the same amount, and its certainly better than a consolidation that spreads your payments over a longer period (which a lot of people do) but to the lenders the issue is just that you might end up with repayments of £1500 a month (the old £750 on the existing debts and the new £750) and they obviously know you couldn't afford that amount.
Its not a case of them not liking you not paying then much in interest.

GeorgieFTB

bellehc

Your best bet is to fill out a full SOA, there is a link in the sticky at the top of the board and post it up on this thread, you will get lots of good advice on which debts to focus on and where you could save money, then use a snowball calculator to figure out how long it will take you to pay it off.

Personally I would concentrate on paying off one CC and once clear see if they will give you a special rate then transfer the next most expensive card to that one.

Sorry there isn't an easy answer but after a rejection I think you might find it hard to consolidate.

Gx

mrsb83_2

Agree with all of Tixy's points.

I don't know you or your circumstances, but could you not increase your payments? Even £100 more a month would make a big difference, but if you and your H have good jobs, you could pay even more.

Me and my DH have a combined salary of £40k and manage to pay £900 a month with plenty left over for living.