Consolidating Debt

Tricky_Dicky_3

Hi There - I am new to the board tonight

Just after a bit of advice here please - I cuurently owe the following:
Natwest OD £3000 17.9%
Egg Card £4500 17.9%
Egg Loan £2500 7.7%
Natwest Loan £6000 8%

I have decided to consolidate all of these into a new Natwest Loan for £17000 at 6.9% - but over a longer term. This will reduce my payments to £253 pcm - making this much more manageable - is this the best option open to me to start to get on top of these debts??

Thanks in advance

CLAPTON

your debts add up to 16,000 so why are you borrowing 17,000?

how did the debts arise?

have you addressed the reason for the debts?

if you dont address the reasons for the debts you are very likely to simply run up new debts on your CCs and very soon you will be back to having large CC debts and also a large loan.

post a SOA and lets see if we can help with your spendings.

Tricky_Dicky_3

Have already cut up the 2 cards I have Egg (£4500) and M&S (£0) so hopefully that sorts out the problem of using those again.

SOA is as follows:
Monthly Income - £1472

Outgoings:
Rent (inc all Bills) - £650
Car Insurance £34
Egg Card £100
Egg Loan £155
Natwest Loan £170
Mobile £50
Food £100
Petrol £50
Going Out £100
Misc (car servicing, tax etc) £20

Reason for taking out £17 000 is that being £3000 overdrawn means that clearing all the debts (inc CCs and Loans) will only take me back to £0 on my current account - I would need to have money in my account to prevent me going overdrawn again before i get paid next month - otherwise my pay is just eaten up by the overdraft. Hope that makes sense??

Tricky_Dicky_3

Forgot to say that the debts have arisen from overspending generally - which I now obviously need to address - although the original egg loan was for a new car and laptop. Can just never seem to get out of a downward spiral:o

roswell

Personnaly I would address the over spend first beofre you decide to go for the loan, you may aslo find that £15000 is cheaper to borrow than say £15 001 due tot eh way loan tables work.

if i was you look at the over spending and budgeting get that out the way other wise you will find you have more free cash each month that your itching to spend that only £10 sort of that new tv / ipod etc so just stick it on card and pay it off next month or the next or .........

mjdh1957

I agree with the advice about tackling the overspend first before consolidating. I've been in the situation where I consolidated and then ended up in a worse debt than before...

It was only on the third time that I had a real lightbulb moment (it helped that I was single by then so no partner to drag me down again).

So, look at your expenditure, cut back and see how you're placed in a couple of months time. Then you'll have a clearer picture of where the money all goes and might need a smaller loan to pay it off!

Tricky_Dicky_3

ok thanks - when you say tackling the overspend though - how does that help me pay off the debt?

Saving a few quid here and there isn't going to reduce my overdraft - my wages are only paying off half of that at the moment? So if i reduce my expenditure by -say 20%- i will still be paying a load of interest and the problem will still be there.

Consolidating all the debt now surely gives me a better chance of clearing the debt - whilst reducing the interest i am paying thus saving me money.

Tackling the overspend as well as reducing the amount i am paying off the debt seems sensible to me!

lynzpower

Saving a few quid here and there isn't going to reduce my overdraft - my wages are only paying off half of that at the moment? So if i reduce my expenditure by -say 20%- i will still be paying a load of interest and the problem will still be there.

You need to read more of what we do here tricky

Whittling away those few quid here and there, is FUNDAMENTAL to getting debt free in the way that most of us do.

You need to either, slice back your outgoings, ( that 50 mobile bill looks unnesseary, theres at least a 25 quid saving a month there?) that 25 quid will go to your highest APR debt. Every other little saving & money making scheme ( selling old mobiles? Extra work? ebay?) gets pumped into the debt, so not only does it reduce, but you improve your credit rating at the same time.

You say you clsed your M&S, when was this? this should start to improve your credit rating

How is your credit rating?

I would apply to move debt onto a 0% card, rather than an interest laden OD.

hypno06

lynzpower wrote:

You need to read more of what we do here tricky

Whittling away those few quid here and there, is FUNDAMENTAL to getting debt free in the way that most of us do.

.

I agree with this in that you have stated that the reason for your debt is largely overspending.

By immediately tackling this, saving even a few pence here and there, you are retraining yourself to sensible spending patterns, deciding in a new way whether you really do NEED that item rather than simply buy now, think later.

Unfortunately many of us have made the mistake of consolidating and not tackling the underlying problem, thereby finding ourself with more debt just a short time later. I have consolidated 3 times in the last 7 years, each time thinking that this would solve my problems, yet 12 months ago I had unsecured debt of £100k because we had not made the changes in our spending.

Please do not underestimate the power of making these small changes - they really can get you free of debt, and financially secure. Consolidation MAY be the right thing to do, but it may also be a big mistake if you do not look after the pennies.

Good luck, and keep posting for advice etc.

betti911

Hi Dicky,
I'm a new DFW although I have been 'lurking' on the forum for some time. I've only been following the advice given here properly for a month but already I have managed to reduce my debt by more than I could have predicted. I know I've a long way to go but I'm so glad that I've started. Honestly its the small things that count. Listen to the others.

Good luck Betti

Tricky_Dicky_3

Thanks for the advice here - i am just worried about the amount of interest I am paying across the different debts.

To me it seems sensible to reduce the interest payments, cut up the cards AND review my spending at the same time. This will enable me to manage my outgoings better and I then have a regular payment coming out for just one loan! Agreed I need to make sure I don't get into this situation again.

Am going to start today by trying to arrange a cheaper phone package - this is the first step!!!