Have I Done The Right Thing?

Quincifer

I just need some reassurance that I have made the right decision in my situation.

I've just consolidated most of my debt into one loan so my situation has now changed like this -
Before - Loan=owed £201 + paying £40/mth, Overdraft=£1380 + paying £18/mth interest
After - Loan=£1700(plus interest) + paying £66/mth
This leaves me £200 to help also pay off some of my credit card and store card (only £270 on them combined)

I know I am paying more now than I was before, however I haven't been out of my overdraft at all for about 2 years because it is SO much and I feel this will be a more structured way of paying it off (even if it does mean paying loan interest). I'm planning to save a bit each month to go towards paying it off a bit earlier and i'm moving back in with my mum for about 6 months anyway which will free up some money, but I hear so much bad stuff about debt consolidation.

Have I done the right thing for me or is it a bad idea?

Thanks x

elantan

it wouldnt be what i would do or possibly many others here but if you feel it's right for you then it is ...no-one can say what's right for you apart from you it's you that's paying it ...just try and make sure you close those avenues of debt straight away so youdont spend on them again and cut every card up as you clear them ...good luck it's a long hard slog but worth it

TheAble

It's impossible to say without knowing the APRs. Please list APRs of:
a) Initial loan
b) Overdraft
c) Consolidation loan

Thanks!

beanielou

Will only work as long as you dont spend any more at all on credit & store cards.

misspoppy

Well if you do this you have to commit to changing your attitude to money.
1. cancel the od and if you feel you need to get one in the future ask yourself why did you consolidate in the first place.
2. make sure that the balance is used to pay off your credit cards and then cut them up and cancel the cards and do not take out anymore.

The reason why most people don't ever get out of debt is because they consolodate and consolodate and never do any of the 2 points above. Once you've done this you really need to take control of your finances and ensure that you budget and live within your means.

ifstar

Consolidation isn't necessarily a bad thing, it might mean you can drop from stupidly rates (16% + ) down to something much lower (5-9%). As pointed out above, where it becomes a problem is when the person doesn't change their spending habits and ends up using the cards again (or getting new ones).

If you haven't already done so, make a budget using Martin's article and the spreadsheet. It's also worth keeping a spending diary as this does make you think over your purchases.

Quincifer

Because it isn't a high amount of debt my actual interest rates haven't changed much which I guess isn't great.

I admit I am awful at paying off debts and the reason my overdraft got so high is because I kept needing a bit extra and never paid it back afterwards. My willpower is ZERO. I feel like having it in one loan will mean I have no means of getting the money back once its paid, it'll be completely gone and there is no temptation to get it back again. I need a bit of structure to it I think, I dunno.

The lady in the bank has said she is going to cut my overdraft to £100 and put a block on it so I can't increase it even if I wanted to, thankgod.
All I need to focus on now is saving up some money to pay it off quicker and get myself a rainy day fund!

Thanks for all your comments and advice!
xxxxx

southernscouser

ifstar wrote: »

Consolidation isn't necessarily a bad thing, it might mean you can drop from stupidly rates (16% + ) down to something much lower (5-9%). As pointed out above, where it becomes a problem is when the person doesn't change their spending habits and ends up using the cards again (or getting new ones).

Was gonna say the exact same thing.

taxi73

I totally agree with the others it will only work if you don't take out any more credit

Quincifer

I've just cut up my credit and store card - I have no choice now!
Thanks x

mrsspendalot

You actually need to contact the companies to close the accounts - cutting up your cards does not stop you using the accounts - It feels good, honest