Debt Consolidation Loan

RickMave

I'm looking to take out a personal loan to consolidate debts, which include one overdraft, one credit card, and pay off an existing personal loan which has 14 months to run.

All of the numbers add up to make this both possible and realistic, however I am a little concerned with regard to the following situation.

I have the above debts which the new PL will pay off completely. However I'm a bit concerned that the lender might look at my credit situation and be concerned that I'm actually trying to add further to my overall deficit (as they wouldn't be aware of my plan to use this new loan for consolidation purposes).

Am I worrying unnecessarily? Not a new feature in my life....

Poosmate

Consolidating debts is rarely a good idea. Yeah it works perfectly on paper every single time but it rarely works out in reality. If you do go down the consolidation route you 100% MUST cancel your overdraft and close your credit card account.

Was your existing personal loan taken out to pay off debts? Do you still use your credit card? Do you always go up to the limit of your overdraft? If you answer yes to any of these questions, you need to stop spending and living beyond your means and forget the loan. First thing to concentrate on is getting your spending under control, get yourself weaned off credit and start paying it off at more than the minimum each month.

Believe me, most of the people on this forum have been there and done the consolidation thing and it rarely works.

Poo

blacksta

Consolidation loans are similar to a drug addicts looking for a temporary fix. Why does it matter where loans are at the moment. what is required is an attitude of buckling down and paying the damn thing off whilst living within your means.

irishcol

Some people need to change the record, rather than simply regurgitating advice they've heard elsewhere.

You might be right that, in general, consolidation can lead to further borrowing. But without knowing the individual circumstances, you can't just make that blanket statement.

The OP might be paying 25% on a credit card, 20% + fees on an unauthorised overdraft and 15%+ on the existing loan, while being able to get a rate of, say, 12.9% on the new loan. In that case, he/she woul be perfectly sensible to consider doing this, provided the existing debts are fully paid off and not repeated.

The money saved in reduced interest payments could be put into a savings fund, leaving them in a much better financial position.

CLAPTON

RickMave wrote: »

All of the numbers add up to make this both possible and realistic, however I am a little concerned with regard to the following situation.

what are the numbers?

DCFC79

CLAPTON wrote: »

what are the numbers?

The numbers are:
10 24 33 38 44 48

Oh sorry wrong thread,

RobertoMoir

irishcol wrote: »

Some people need to change the record, rather than simply regurgitating advice they've heard elsewhere.

You might be right that, in general, consolidation can lead to further borrowing. But without knowing the individual circumstances, you can't just make that blanket statement.

The OP might be paying 25% on a credit card, 20% + fees on an unauthorised overdraft and 15%+ on the existing loan, while being able to get a rate of, say, 12.9% on the new loan. In that case, he/she woul be perfectly sensible to consider doing this, provided the existing debts are fully paid off and not repeated.

The money saved in reduced interest payments could be put into a savings fund, leaving them in a much better financial position.

It's certainly possible for a "consolidation loan" to work, this is true. But its very much based upon the person, and I dislike them because its based on the - imho - faulty premise that the cure to a debt problem is to get into more debt.

IF the person doing it is very strong willed and won't put new spending on their old cards/overdraft or IF they're prepared to cut those cards up, close accounts, etc. then this may be a good choice... BUT we see time and time again here that it doesn't end up that way. This is why many of us play the same old "record" over and over.

Incidentally, if there is that much extra disposable income after the consolidation loan, I'd look to pay off the loan quicker if possible rather than save right now, at least once a reasonable contingency fund is saved anyway. The insurance rates for most savings accounts are still underwater, and paying off loans quicker might be a way of making the money work harder.

blacksta

I totally agree that the OP has not given much details. Maybe moving from a higher apr to lower apr. But the general trend is that many view consolidation loans as an easy way out. A place where i would be able to lower my payments and extend my debt ( forgetting that it will cost me more on the long run).

Look at the typical consolidation loan adverts on tv - It is never about getting a lower apr - most times it is always about reducing your payments hiding the fact - that you will pay more over time.

smallblueplanet

Poosmate wrote: »

...
Believe me, most of the people on this forum have been there and done the consolidation thing and it rarely works.

Poo

Such a sweeping statement based on hardly any info from the OP. Or looking at the other posts on here just a view that 'consolidation loans' are per se 'bad'!

If the OP is consolidating debt to make his repayments more affordable and so keep themselves from 'going under' then I don't see why is it a bad thing. It all boils down to why and what they are borrowing.

Edit - oh and OP if you're worried about the lender not knowing the loan is to pay off (and close down) other debts, you could try telling them? Try your bank if they are offering good rates?

geoffky

irishcol wrote: »

Some people need to change the record, rather than simply regurgitating advice they've heard elsewhere.

You might be right that, in general, consolidation can lead to further borrowing. But without knowing the individual circumstances, you can't just make that blanket statement.

The OP might be paying 25% on a credit card, 20% + fees on an unauthorised overdraft and 15%+ on the existing loan, while being able to get a rate of, say, 12.9% on the new loan. In that case, he/she woul be perfectly sensible to consider doing this, provided the existing debts are fully paid off and not repeated.

The money saved in reduced interest payments could be put into a savings fund, leaving them in a much better financial position.

we do not do soft love around here m8 just tough love and by doing it the op ends up getting a reality dose instead of the yes go ahead thats fine love. you will learn..;)

Poosmate

Smallblueplanet you will notice I used the word "forum" NOT "board". Yes we are on the Loans board and possibly many people don't admit to taking out loans for consolidation purposes or that they've done it before in this neck of the woods.

Having been a member of this site for almost 4 years and being active in the Debtfreewannabe board along with many others, I can make such "sweeping" statements because it does include many on the debt, credit and loan boards - I have read a lot of threads and contributed to some.

Had the OP provided more information then obviously a more informed response would have been given. So it was a more generalised response erring on the side of caution. I also asked the questions that, if answered honestly, will hopefully make the OP realise the best way forward for their situation/personality.

I stand by my first post, though I do notice now that I contradicted myself in the first paragraph saying consolidation never works then in the last saying they rarely work! Oh well, it was late and I was tired, I'm only human. I shall go and edit it now.

Poo