consolidating my loans, why not??

milkymalone

i have 3 loans in place. one stands at about 4600, one stands at about 8200, and the other stands at about 15,000.

i have been using other methods of credit inc. cards and overdraft to maintain most of these payments but i have now paid off all credit cards and overdraft and dont wish to get back in debt with multiple more creditors.

i understand that consolidating these loans will change these personal loans to a secured loan but as long as i maintain the payments then nothing would happen to my home yes? they are not able to suddenly increase how much i need to pay once agreed are they? while i am aware that it will hugely increase how much i pay in the long term, it seems like it can make monthly costs far lower than other options as just using a debt consolidation calculater it says that i could reduce my monthly payments from 752 to 192. (i am aware this might not be accrate)

while i realise that this can hugely increase the total i have to pay back i feel that i will far more easy for me to live with 192 coming out of my bank account every month.

need some geniune advice as im sure there are other factors i have not considered.

many thanks.

[Deleted User]

Althought consolidation works in theory, unless you're earning a six figure salary, the chances of getting another loan are virtually nil.

milkymalone

thanks for your responce.

oh really? what makes you say that? surely companies would be happy to take this on as they will make a lot more than what that take on and also have it secured against the property.

[Deleted User]

Becuase you already owe 30k and this will (in their eyes) an additional 30k. Anything you get offered would be at a huge rate.

iolanthe07

Consolidation only works if you're disciplined enough not to start running up debt again. The debtfreewanabe board has many contributors who have consolidated again and again until they are in really deep poo. Also, you bank has no certainty that you will use a new loan to pay off all your old ones, so will see any new loan as an addition to what you have already borrowed.

It is not considered a good idea to convert unsecured debt into secured debt by most commentators here.

R_P_W

You have Ben using credit cards to pay loans? Smart real smart

Cycrow

getting out another loan would add more credit to your existing credit, not replace what you have.

so u'll end up with 60k of credit.

it doesn't matter that you plan to use the loan to clear the previous ones, its not how the lenders will see it.

and changing 30k of unsecured debt into secured debt is never a good idea

Tixy

Many secured loans are variable rates - so the rates may go up and you may be unable to afford the repayments. Sometimes they go up by relatively large amounts (and of course are not fixed to the base rate as they are variable).

Or your circumstances may change and you may be unable to afford the repayments (redundancy / ill health etc).

Either case could mean you are at a greater risk of losing your house.

You also would need to consider the current value of your house and current mortgage and consider the implications of borrowing further. Life gets more inflexible with additional secured loans - say you decide you want or need to relocate and rent your house out, mortgage lender may give consent to let, secured loan provider may not.

Secured loan are generally taken out over a much longer period of time, so even if the APR is smaller in total you may end up paying more interest overall.

Even if you are struggling to pay £752 surely you don't need to reduce it to £192? where has the £192 figure come from? have you worked out a detailed income & expenditure and is that really all you can afford a month?

Lou67

Have to agree with iolan, that a consolidation loan is fine as long as you are disciplined enough to not run up the debt again, which many are NOT. (me and hubby fall into that category LOL) and several pals of mine have been the same.

You say it's reducing it from 750 to 200 or thereabouts but remember that this debt will be for 25 years (I am guessing that's the term from the repayments of 192 a month on the amount of money you will be borrowing.) The 750 you are paying now seems large, but will pay off the debt much sooner.

We took a £30K loan over 25 years in 2007; biggest mistake of our lives. After 3 years, we had paid about £10K off it and the balance was STILL £30K. When we slipped up on the payments, when our financial problems got worse, the loan company issued a warning to repossess our property. By the end of the first 3 years, we had paid £10K (as I said,) and we also had another £15K worth of debt (car finance, credit cards run up again, loan for new boiler.)

I would run a mile from a massive secured consolidation loan. If I saw my time over again, I would have made sacrifices and paid the existing loan and credit card payments and we would have paid everything off by now! (About 25K of debt...)

I think it's incorrect that you have to be on six figures too. You just need to be able to afford the repayments.

I would seriously try and figure something else out, rather than taking out a massive secure loan. I would wager that you will regret it, and pretty soon after you take it (ie: within several years...)

Cycrow

Lou67 wrote: »

I think it's incorrect that you have to be on six figures too. You just need to be able to afford the repayments.

althou its not a fixed rule, many lenders will not give you credit of more than 50% of your annual income.
so with 30k debts already, needing another 30k loan, would be 60k of credit, so an annual income of 120k as lenders will take into account all existing credit on top of what your applying for

Tixy

The rough guideline of people struggling to be accepted for more than 50% of your total salary is in relation to unsecured debt.

Secured lending is considered differently and lenders look at equity in the property and monthly repayment amounts (and other existing commitments).

But they still won't assume that the secured lending will pay off the unsecured debt, so they'll be more likely considering if the borrower can afford to repay their mortgage, their existing unsecured loans and the new secured loan on top of that, and livings costs etc based on their income.