Is it better to consolidate?

bandraoi

to save OUR money, consolidation loans are better? I would be grateful for your thoughts?

Yes in theory, No in practice.

Mathematically it all adds up take out a lower interest consolidation loan and pay it off at a set rate BUT
in practice 99% of people will continue to overspend and end up with a consolidation loan + more debt.

Consolidating your loan is like going on a crash diet.
The consolidation companies basically tell you to go on their crash diet and lose lots of weight, but like with a crash diet afterwards most people go back to eating the way they did before and end up fatter then then they started.

IF you start to eat sensibly you will lose the weight more slowly but you're far more likely to keep it off.

spendthrift66

Nice analogy! I like that.

But, if we definately COULD keep off the credit cards (choccy biscuits and crisps!) then it does make sense to consolidate?

Hmmm ... anyway - thanks very much for your splendid answer. (And, actually - I have done what you describe three times - which is why instead of sitting on about 90K equity in my house after 6 years, I am actually 17k in debt with only about 15k equity. GUTTED!!!!)

bandraoi

The only way I would do the consolidation thing would be in a three step program.

1) Start the sensible eating, monitor it, watch it, make sure that it's working as well as is humanly possible over a period of time and that it's become "normal" as opposed to an annoying inconvenience that I can't wait to leave behind.
then
2) Crash diet
3) Return to sensible eating.

Basically prove to yourself that you can keep off the credit cards (choccy and crisps) for a while, and get to the point where you don't crave them anymore then maybe try a crash diet, but spend a lot of time picking the right crash diet for you.

Bestthingsinlifearefree

spendthrift66 wrote: »

Nice analogy! I like that.

But, if we definately COULD keep off the credit cards (choccy biscuits and crisps!) then it does make sense to consolidate?

Hmmm ... anyway - thanks very much for your splendid answer. (And, actually - I have done what you describe three times - which is why instead of sitting on about 90K equity in my house after 6 years, I am actually 17k in debt with only about 15k equity. GUTTED!!!!)

That is the problem spendthrift people think:

consolidation = paying off debt.

When in reality consolidation does not pay off any debt. It is just moving debt around.

Consolidation just allows you to post pone paying off the debt, run up more debt and keep spending.

Hence consolidation is generally viewed as a "bad" course of action.

spendthrift66

Bandraoi and Bestthings - couldn't agree more (see above). But, have been out of work for two months now and we have tightened our belts pretty damn tight. So, I won't be rushing down the 'crash diet' route and if I do will follow Bandraoi's 3 step plan. I am soooo cheesed off at the mess I've got myself into over the years. Just as my dear daughter is off to Uni and I should be free to do more - I am skinter than ever. I've learnt my lesson the hard way, believe me.
Bye for now.

Pop_Sox

Have visited the snowballing whatiscosts website, it's really good. Apparently if I can pay out £800 a month I will be debt free in 24 months. This should be manageable as I am currently paying £500 a month anyway on my repayments, and with some careful budgeting this could be manageable leaving me £200 leeway in my surplus - at least after six months I would see a significant difference and after twelve would have got rid of four debts completely so that's encouraging.

Have cut my cards up except the lowest interest one (the smile one) which is maxed out anyway. I also think that using a debit card doesn't help me keeping track of my spending.

Is it better to work out how much cash you need a week and take that out of the cashpoint - does spending real cash make it sink in more that you are actually spending money? Or is it better to do that on a monthly basis? Would need a lot of willpower not to use the debit card anyway when the cash was all used up....

wherediditallgo

Pop_Sox wrote: »

Is it better to work out how much cash you need a week and take that out of the cashpoint - does spending real cash make it sink in more that you are actually spending money? Or is it better to do that on a monthly basis? Would need a lot of willpower not to use the debit card anyway when the cash was all used up....

I work out how much for the month, then x 12 & divide by 52 to get the weekly amount. I'm also one for feeling the draw of the cashpoint, but I haven't had a debit card for over 2 weeks until today & I've managed. If you're also going to feel tempted, then a weekly allowance is probably a better way to go - there's less time to get withdrawal symptoms. Spending real cash is definitely an awakener - with a weekly allowance, I know I can't spend a load at the beginning of the week because I won't have any more until the next weekend.

I can remember when I was on weekly pay - I used to save so much more money back then, because there were only ever a few days to go until the next payday, so I just made the money last or did without instead of being tempted to use a debit/credit card. If I had a choice, I'd go back to weekly pay in a heartbeat.

spendthrift66

That's brilliant! Only two years!

I find that it is better to take out an amount of cash and watch it dwindle all week - it puts your spending into perspective. I think that by using plastic (wether debit card or credit card) you just don't feel the pain of spending the money and it's so easy to spend more. Since I have been out of work, and my overdraft is up to its limit - my OH leaves me money each day (only one operational cash card between us) and most days I just don't spend a thing as I want to keep it in my purse! It's amazing how easy it is to do without a weekly copy of heat magazine for example, or odds and ends of shopping when your cupboard is already full!

Good luck with it all - lots of people here will give you really good advice! Keep us posted. If you haven't already - check out Money Saving Old Style board - there's loads of brilliant ideas on there and it's usually a bit of a giggle!

Spendthrift

Pop_Sox

Thanks for the encouragement. I know the income/outgoing says that I have £1000 a month surplus to pay debts, but I felt if I didn't allow myself some leeway I would not stick to the plan, and if I get really good at budgeting could maybe save that extra £200 or use it to make extra payments.

spendthrift66

And don't forget a little treat for you and your son or daughter! I think you need it - doesn't have to be expensive. I've got a code for three months free lovefilm which I find to be very useful (if you cancel it before you pay for it!) Or even if you keep it it works out cheaper than blockbuster rentals ... let me know if you want it.