Consolidation: Is it ever a good idea?

Mort

HeadAbove wrote: »

We have had mixed reports as to whether this would be a sensible way to go but to my mind it makes perfect sense. Credit cards have already been cut up and we have no intention of using these again, similarly if we do go ahead the overdrafts will be removed.

I have been one of the 85%. My mistake was keeping the overdraft and a credit card and starting to spend on them again:o. But it looks like you have already spotted the pitfalls of that strategy.
My inclination would be to say don't do it, but only you know what you are capable of.

Whatever you decide I wish you luck.

System

I think it can definately work - I was paying two credit card balances on around 18% - had tarted a bit but ended up paying the minimum and so never really making inroads into the debt.

Consolidated onto a HSBC personal loan at a bargain 6.9%, got rid of one cc and asked the lender to reduce the credit on the second (kept at home to stop shopping temptation)

Most months I pay additional but if not I know that the whole lot will be gone in 3 years anyway. Unlike the never ending credit card!

foxgloves

Before we decided to get a proper budget in place, we consolidated 3 times. As behaviours didn't change, the lower monthly repayment amounts lured us into thinking we had more disposable cash, so overspending continued. We also found we fell into that well-known trap of borrowing a bit more than we needed each time 'just in case'........ We'd both had LBMs by the time we were half way through paying off the 3rd one & we wouldn't do it again. If LBMs have been had, budgets & sensible spending regimes are in place, then it could be a different story.

Taadaa

Ive consolidated twice and both times ended up with more debt. I haven't missed any payments but l doubt l would gwt another loan with a decent rate. I can't tart anymore, been refused a couple if times. At least if l bring in a little more l can overpay.

immoral_angeluk

It can work but it can also fail miserably. One of the big things to consider though, is if you would actually be able to GET a consolidation loan. You would need a serious income and perfect credit rating to be able to get a loan as they will assess you for the full balance of your existing debt PLUS the new loan and lenders generally don't like lending at more than 50% of your income.

So for example, if you had 10k debt and wanted a consolidation loan for 10k, they would assess you for 20k and would be likely to reject you unless you earned 40k minimum...

Taadaa

I think it might be tougher than that even, my debt is a third of my annual income and no one will lend me any more to consolidate.

Toni_Broke

Hi

We have consolidated 4 times with none of them being sucessful! We have now however had our true LBM and have a third of our debt left to clear.

We have been snowballing our debt and i can tell you now its gathering momentum there is nothing more satisfying than seeing a card go in one foul swoop! The thing with a loan, the same payment each month might sound attractive at first but it gets very dull and a bit soul destroying wear as with the snowball method you really begin to see inroads and become quite excited about the next payment! (sad i know).

However you just might have more will power than we ever did!

Good luck with whatever you decide
Toni xx