Loans to consollidat debt

Shelldean

The reason is simple the bank gives you a loan, you pay off your credit cards debt, so you only have the loan to repay. BUT then you run up the credit card debts again, so now have to pay credit card plus loan.
And yes I know you'll say oooo I wont do that, but many people do ( myself included) and once in the cycle it's almost as bad as pay loans trying to escape!!!

Our first loan to consolidate debt was 1500 and ten yrs ago. Our last one was over 15000!!!!!!! We've just broken the cycle and finally cleared loan, but we still have credit card debt ( 14mth to debt free and counting)
We swore we'd consolidate and NOT use the cards again, but it's very easy to use them again.

And this what the banks will think you will be doing, no matter how much you protest you wont

pheonixrising21

Shelldean wrote: »

The reason is simple the bank gives you a loan, you pay off your credit cards debt, so you only have the loan to repay. BUT then you run up the credit card debts again, so now have to pay credit card plus loan.
And yes I know you'll say oooo I wont do that, but many people do ( myself included) and once in the cycle it's almost as bad as pay loans trying to escape!!!

Our first loan to consolidate debt was 1500 and ten yrs ago. Our last one was over 15000!!!!!!! We've just broken the cycle and finally cleared loan, but we still have credit card debt ( 14mth to debt free and counting)
We swore we'd consolidate and NOT use the cards again, but it's very easy to use them again.

And this what the banks will think you will be doing, no matter how much you protest you wont

Yet another reason why consolidation loans should work like motor finance

debtcutter

pheonixrising21 wrote: »

Yet another reason why consolidation loans should work like motor finance

There are a ridiculously huge number of things that could stop people being able to pay off credit, then re-spending the money, but not everyone wants them.

If I want to clear a credit card to another one and then keep that card to pay for unexpected bills, that's my choice. IF something shiny takes my fancy and I want it, that's my choice too.

Forcing lenders to jump through hoops just to lend to people for the purpose of debt consolidation wouldn't be anywhere near the least problematic. It would almost certainly lead to less lenders giving out loans for debt consolidation and more borrowers lying about the purpose of their loan as a result, IMO.

It might be a fairly quick way.

pheonixrising21

debtcutter wrote: »

There are a ridiculously huge number of things that could stop people being able to pay off credit, then re-spending the money, but not everyone wants them.

If I want to clear a credit card to another one and then keep that card to pay for unexpected bills, that's my choice. IF something shiny takes my fancy and I want it, that's my choice too.

Forcing lenders to jump through hoops just to lend to people for the purpose of debt consolidation wouldn't be anywhere near the least problematic. It would almost certainly lead to less lenders giving out loans for debt consolidation and more borrowers lying about the purpose of their loan as a result, IMO.

It might be a fairly quick way.

Not saying lenders should be forced to do it, and clearly it should be an option for the applicant too.

An applicant could choose to allow the new lender to pay off current credit for them and close those accounts, or they could choose to have the new cash themselves and do what they like with it. In the latter case (how things work now), affordability would be calculated on old debt + new debt and accepted/rejected accordingly (as it is now). In the former case, affordability could be calculated on the new loan amount only.

IMO, it would lead to more loans for consolidation than currently as those applicants with good payment history but fail affordability tests may well be accepted if the "total" debt is effectively halved (i.e. new loan applicant amount only)

Also, are there less companies offering motor finance as a result of offering the service to pay off the current finance when trading in? Are less banks offering current accounts as a result of offering a switching service? IMO, no, in both cases...

I'd also be interested in the other methods you mention that stop people being able to pay off a loan and re-spend...

debtcutter

pheonixrising21 wrote: »

I'd also be interested in the other methods you mention that stop people being able to pay off a loan and re-spend...

The most obvious alternative would be arming everyone with the tools to make sounder judgments: Education in credit and personal finance from a young age, rather than only giving it to people that opt in to particular subjects at the age of 14-16 (this problem is caused by a knowledge gap, for most people)

I don't really get where you've taken the info to form the basis of your argument. You're suggesting that doing this would allow you to get credit that you can't now. How do you know the lender would consider you to be able to afford the loan, if you didn't have the existing debt?

If I pay that loan off for you now and then you apply to the lender next week for a different loan purpose, how do you know they wouldn't decline you for affordability still?

You think you can afford it (by the sounds of it, you definitely can), but they have stats based on millions of other people who have similar levels of available income to you that will give them an idea of your statistical likelihood to pay the loan back.

If you're a lot more responsible with money than most people with a similar disposable income to you, you're dragging up the average and they'll make you seem like more of a risk than you think you are.

CLAPTON

pheonixrising21 wrote: »

The OP doesn't state either way whether they can comfortably pay their debts or not, which is why I used the phrase "many people". I have not made an assumption either way. You made an assumption and I was merely pointing out that it is just that, purely an assumption.

You may, of course, be correct in your assumption and the OP is struggling to pay their debts, but until the OP states such as a fact, its purely an assumption on your part.

I have to disagree, in that my specific circumstances are relevant here, as I am in a similar situation to the OP in wanting to consolidate but unable to due to total affordability. My specific circumstances prove my point that the assumption you made may not be correct (i.e if I had been the OP and posted that message as my first ever post, your assumption would be entirely wrong).

Reread my post and note the use of the word 'if'.

Apples2

CLAPTON wrote: »

Reread my post and note the use of the word 'if'.

pheonixrising21 challenging/condemning other peoples posts... whatever next??

pheonixrising21

Apples2 wrote: »

pheonixrising21 challenging/condemning other peoples posts... whatever next??

Is that not allowed on forum? I do apologise Apples2, for voicing my opinion. Something you do regularly

pheonixrising21

debtcutter wrote: »

The most obvious alternative would be arming everyone with the tools to make sounder judgments: Education in credit and personal finance from a young age, rather than only giving it to people that opt in to particular subjects at the age of 14-16 (this problem is caused by a knowledge gap, for most people)

I don't really get where you've taken the info to form the basis of your argument. You're suggesting that doing this would allow you to get credit that you can't now. How do you know the lender would consider you to be able to afford the loan, if you didn't have the existing debt?

If I pay that loan off for you now and then you apply to the lender next week for a different loan purpose, how do you know they wouldn't decline you for affordability still?

You think you can afford it (by the sounds of it, you definitely can), but they have stats based on millions of other people who have similar levels of available income to you that will give them an idea of your statistical likelihood to pay the loan back.

If you're a lot more responsible with money than most people with a similar disposable income to you, you're dragging up the average and they'll make you seem like more of a risk than you think you are.

I take your point about financial education at school, it should be made compulsory. However, it won't physically stop someone taking out a consolidation loan and then re-spending on the cards they just paid off. It would make it less likely to happen and they would be pre-warned of the consequences, etc, but they could still do it if they wanted to. Most people are taught at school that stealing iss bad and has consequences, but that doesn't physically stop anyone stealing (look in our prisons to find that out).

And I take your point that whether the new lender has the ability to pay an existing debt off for me is no guarantee I would be accepted for affordability, but I never stated it was. If you paid off my £7.5k debt for me and I then applied for a £7.5k loan, affordability would be calculated on £7.5k, correct? If I were to apply now for a £7.5k loan, affordability would be calculated on £15k. Which situation has the higher chance of success if all other variables are the same? New lenders paying off existing lenders would mean affordability could be calculated on new loan application value only. Is it that difficult a concept? Maybe I'm over simplifying things?

pheonixrising21

Apples2 wrote: »

pheonixrising21 challenging/condemning other peoples posts... whatever next??

BTW Apples2, I don't mean to "condemn" anyone's posts. Challenge, yes, condemn, no. If it appears that way, then I genuinely apologise.