Consolidating

silverjean

Hi all, just looking for a little advice.

Im wondering wether to consolidate my debt. I have a loan which i took out the year before last, it was £6000 and i have worked every day since jan 2012 and i now have it down to £2300. It was originally a 4 year loan but i want to pay it off as soon as possible as i pay £181 a month off it, plus any extra i may be able to afford.
I also have a credit card which is £3900 (£100 a month but interest makes it so im only paying £40 off a month!), another one at £500 (£15 a month), a store card at £400 (£25 a month) plus my partner has a debt with santander of £450 (21 a month. we a paying no interest on this as have an arrangement with them) and a debt with BT for cancelling which is with a debt agency now (£30 a month).

I work so hard every day and im getting so ill which means i have to have time off that i loose money, i dont think i can do it for much longer. Is it better to keep doing what im doing and my goal is to pay it off by the middle of next year if i can carry on working every day, because there is money left over. Or do i consolidate it and put it into one payment and do less hours at work. or do i consolidate all of it except the loan and try to focus more on paying the loan off as that will give me an extra £181 in a few months time?

Sorry if i have confused you all!

19lottie82

1) what is the total amount of your debt?

2) how much do you earn?

2) how is your credit history? any missed payments or defaults?

heartbreak_star

Will you actually get a loan?

Will you run up the debts again?

Don't go for a loan - if you're having trouble speak to StepChange, they will help

HBS x

moohound

Repeatedly consolidating helped me get into my horrendous mess, If I had my time again I would not do it.

ValHaller

silverjean wrote: »

Im wondering wether to consolidate my debt. I have a loan which i took out the year before last, it was £6000 and i have worked every day since jan 2012 and i now have it down to £2300. It was originally a 4 year loan but i want to pay it off as soon as possible as i pay £181 a month off it, plus any extra i may be able to afford.
I also have a credit card which is £3900 (£100 a month but interest makes it so im only paying £40 off a month!), another one at £500 (£15 a month), a store card at £400 (£25 a month) plus my partner has a debt with santander of £450 (21 a month. we a paying no interest on this as have an arrangement with them) and a debt with BT for cancelling which is with a debt agency now (£30 a month).

Can you list your debts and state for each of them

• Amount Outstanding
• Minimum Monthly Payment
• Actual Monthly Payment
• APR
• Date of last payment for loans as opposed to cards

Don't miss out any of th information please! Really you need to do a full Statement of Affairs which will contain most of the above information and if you post it here people will help with suggestions on how you can use your money more effectively.

But for the moment, I would just ask for the information on the debts, to see if we can find some ways of cutting you some slack without 'consolidating'. I have said before

The only situation where it does seem to work is where people

• are living entirely within their means for current expenditure
• have got on top of the underlying reasons for their debt issues
• are using a consolidation loan to reduce the interest so they escape the debt more quickly rather than postpone paying it off to further in the future

I rather think you are not on top of this enough to meet the above criteria and if you do use consolidation i fear it will make your problems worse. In your situation, it is generally best to pay the debt down where it is already.

Suseka

Hi SilverJean,

All good advice thus far, so I have nothing more to add -other than to say that the ridiculous mess I am in debt wise, had much to do with the fact that-

a) we were not living entirely within our means (hence the idea a consolidation was the answer)
b) had not got on top of the underlying reasons for our debt

so, we ended up okay a first - one monthly payment to one creditor - then life, other bills, excessive spending (some necessary, some not) resulted in more loans, more cc's to a point where we are now.

It's actually a 1/3rd reduction in my OH's income that has forced us to deal with it - and we are about to enter into a DMP with StepChange.

If I had my time again - I would never have consolidated.

Just my penneth' worth.

moohound

Suseka wrote: »

Hi SilverJean,

All good advice thus far, so I have nothing more to add -other than to say that the ridiculous mess I am in debt wise, had much to do with the fact that-

a) we were not living entirely within our means (hence the idea a consolidation was the answer)
b) had not got on top of the underlying reasons for our debt

so, we ended up okay a first - one monthly payment to one creditor - then life, other bills, excessive spending (some necessary, some not) resulted in more loans, more cc's to a point where we are now.

It's actually a 1/3rd reduction in my OH's income that has forced us to deal with it - and we are about to enter into a DMP with StepChange.

If I had my time again - I would never have consolidated.

Just my penneth' worth.

I entirely agree with this, similar to what happened to me. My last consolidation turned a £15000 debt into £20000 one for example.

silverjean

Thank you all for replying.
My aim is to be debt free by next year as i want to be able to move in with my boyfriend properly and to start a family. This is my goal as its something i really want.

My loan is at £2231, im not sure what the APR is but i pay £181 a month. I never default on any of my payments at all. I got the loan at the end of 2011 and it was £6000. I have worked so hard to get it down to this amount.

My Barclay card debt is at £3900. the min payment is £90 but i pay £100 off a month. the APR is 16.9%.

Capital One is £463.53. Im not sure what the APR is but the min payment is £13 something and i pay £15 a month.

Top Shop is £410.23 and the APR is 24.9%. The min payment is £15 (i think) but i pay £25 off a month.

(I can check all the APRs but would have to call and feel so ill at the moment).

Santander is in my boyfriends name, he went over his overdraft before we met and they just kept charging him, he ended up with a £700 bill! They put it into an overdraft for us so there is no interest we are paying. We were paying £50 a month and have got it down to £450 but we are now paying £21 a month (this was because i went to college and was earning less. I am now back to working 56 hours a week at least).

BT is with a debt agency, in his name. There is £310 left and we have a payment plan with them of £30 a month.

Santander and BT are hurting his credit rating alot, and i want us to get rid of them so he cant start repairing it.

We are living within our limits. Except to do this I am working so many hours and i just feel so ill all the time. Ive had to have time off the last 2 weeks which means i have lost alot of money that i needed.
I worked out before and if i carried on working the hours i do, then by april next year i could have paid everything off.
But im not sure i can carry on working like this. I was thinking of seeing if i could consolidate everything except the loan i have into one. Then any extra i get, pay off my existing loan until it has gone and then after that, do the same to the new one.
Im not even sure if they will give me a loan, when i last checked my credit score, it said good. The thing that goes against me i think is that i already have outstanding debt. Well i think it does anyway.

Please reply with any advice
Sharon

Angry_Bear

Before you look at consolidating, try the snowball calculator (http://www.whatsthecost.com/snowball.aspx) and see what difference it would make by paying off the most expensive debts early (e.g. the TopShop before the loan).

Also think about writing to Santander to complain that by adding lots of charges they increased your OH's financial hardship - they may tell you where to get off, but they might refund some of the charges.

If Santander and BT have already defaulted him, then his credit report is improving just by getting further away from that date. Settling the debt will help, but settling it now and settling it 6 months won't make a difference to the state of his credit report in 1 year iyswim.

onamissionEU

Please please please drop the idea of consolodating debts - this will only lead you to building up more debts as other posters here have said. EVERYONE I know who has tried this route has made their problems worse.

You do, however, have options. If you have not defaulted any credit agreements and have a good credit score you should be able to get 0% or low interest deals with your existing credit cards. Call them and ask what they can offer you - by all means transfer balances between cards to get better rates. A 0% rate for a year will have a massive impact.

IF you have to apply for new credit cards to get 0% deals MAKE SURE you CLOSE the old accounts to avoid the temptation of running up more debts.

ValHaller

silverjean wrote: »

Thank you all for replying.
My aim is to be debt free by next year as i want to be able to move in with my boyfriend properly and to start a family. This is my goal as its something i really want.

My loan is at £2231, im not sure what the APR is but i pay £181 a month. I never default on any of my payments at all. I got the loan at the end of 2011 and it was £6000. I have worked so hard to get it down to this amount.

My Barclay card debt is at £3900. the min payment is £90 but i pay £100 off a month. the APR is 16.9%.

Capital One is £463.53. Im not sure what the APR is but the min payment is £13 something and i pay £15 a month.

Top Shop is £410.23 and the APR is 24.9%. The min payment is £15 (i think) but i pay £25 off a month.

(I can check all the APRs but would have to call and feel so ill at the moment).

Santander is in my boyfriends name, he went over his overdraft before we met and they just kept charging him, he ended up with a £700 bill! They put it into an overdraft for us so there is no interest we are paying. We were paying £50 a month and have got it down to £450 but we are now paying £21 a month (this was because i went to college and was earning less. I am now back to working 56 hours a week at least).

BT is with a debt agency, in his name. There is £310 left and we have a payment plan with them of £30 a month.

Santander and BT are hurting his credit rating alot, and i want us to get rid of them so he cant start repairing it.

OK, mostly got the picture. Biggest outstanding question is whether you and your BF are thinking of your finances as joint - you seem to imply that you have a joint account - in which case your finances are linked and you probably need to deal with your debts on a joint basis in consequence. Is you BF on board with all of this?

Don't bother with posting APRs here for the moment - but follow the advice from Angry Bear below and use the snowball calculator. Note that you will need the APRs and other info to use the calculator.

Angry_Bear wrote: »

Before you look at consolidating, try the snowball calculator (http://www.whatsthecost.com/snowball.aspx) and see what difference it would make by paying off the most expensive debts early (e.g. the TopShop before the loan).

On the snowball calculator there is an option to pay debts in interest order (highest interest first) or balance order (lowest balance first). There is also a little popup window under Which way would you prefer to snowball? ..... What does this mean?! which you can access directly at http://www.whatsthecost.com/popups/snowballing-types.aspx

Angry Bear is suggesting that you pay highest interest first - which is generally the best way to do things if you have enough financial slack. However, if you are making yourself ill to keep up, this says that you have no financial slack and you need to try doing things in a different way.

Now let us look at what you are doing. You are paying more than minimum on several lines of credit. While it is a good thing to pay more than minimum, you should only ever do this on one debt at a time and you should stick with overpaying that one debt until it is completely gone, because once that debt is gone, you no longer need to find the minimum for that debt - it gives you more financial slack more quickly. As you are doing it at the moment, spreading your spare across several debts, you are actually delaying the day when the first debt has been wiped out, so you are not getting the benefit of the slack from no longer having to find minimums for the full number of debts

I suggest that you do the following

1. Pay no more than minimums on all debts - this will ensure that you do not get any more defaults
2. List all of your debts in order of how quickly you could clear them if you overpaid to that debt only. Put defaulted debts ahead of undefaulted debts
3. Put all overpayments to clearing the debt from the top of your list. By keeping defaulted debts at the top of the list, you will get them cleared most quickly and have your credit record show defaults cleared at the earliest date (nb if you won't clear all defaulted debts in 6 years, then put all defaulted debts at the bottom of the list, because they will drop off your credit record anyway earlier than you could clear them)
4. Once a debt is cleared, revisit your list of debts, keeping defaulted debts at the top (or not) and checking that they are still in order of quickest clearing if you overpaid that debt only (this can change as your slack for making overpayments changes and as the minimums bring these debts down.
5. Choose the next debt to overpay
6. At some stage you will have cleared enough debts that the minimums will be easily manageable. Once this happens, put your debts in order of highest interest first - but still keeping defaulted debts ahead of undefaulted debts
7. Choose the next debt to overpay