Is consolidation a good idea or not?

loopyloulou_3

I have £4800 left on a Lloyds TSB loan (which was £9k originally) and £5k on a Virgin CC. My credit rating isnt amazing, and I have struggled in the past to get 0% CCs. My bank has offered me a loan for £10k to consolidate the CC and loan over 10 years, (which I can overpay) at £260 a month.

We have been struggling recently, as we are on a variable rate int only mortgage, which obv has been going up and up - (which we are due to change to fixed at 5.95% soon - we have the offer accepted etc and completion date of 1 sept 07)

I know it means that I am back to where I was a couple of years ago (well £1k worse off), but to be honest it would be nice just to have one loan and thats it. no more CCs for me.

Am I being an idiot in thinking that consolidation is the way forward?

loopyloulou_3

Im just in two minds about it, im worried that when my CC 0% is up (next month) I wont be able to get another 0% one, and I havent been very good with my CC (until lynz made me cut it up! LOL).

I just feel a bit frustrated that i got the original loan for £9k and now am even worse off and owe £10k. Although it would be much easier to have it all in one place and have the ability to overpay and shorten the term.

I think I am going to do a new SOA and see where else I can save money too.

bandraoi

Have you stopped the spending that's building up new loans?

chevalier

If you do consolidate then make sure that you have a flexible loan that allows overpayments. Also you should be aware that many of these loans have the interest front loaded, so that if you should come into some money and go to pay it off (say after a year) you may still owe what you started with because you have only been paying off interest.

Also it is considered unwise to consolidate where the debt is being changed from unsecured to secured debt on a property. If something happens and you can't meet the repayments then your home would be at risk rather than just your credit score. If you are thinking about this route, don't just assume that your bank (who is NOT there to help you but just to make more money off you), has the cheapest rate to offer you. Worth doing some research first?

chev

lynzpower

Hi sugar ( lovin the new avatar )

Just one thing that bothers me at the moment, I want you to have a word with a broker.

There is a lot of stuiff in the press adn I have noted a few people round here saying thgat fixed rate mortgages are being removed from sale by A few lenders. call a all of market broker ( eg alexander hall round the corner from bank are recommended by me) and just double check

Could you not get an low LOB card eg M&S?

System

Hey Lou you know, Consolidation can work, but beware if you are not totally committed and sincere about it. You know all to well you would only be papering over the cracks! i.e. you are still sticking your head in the sand? Don't put it on the house though, why make something that is unsecured, secured. Lenny

loopyloulou_3

def not putting it on the house. no way. never ever fixing anything on that. head is def out of sand and spending has well and truely stopped!

Lynz re the mortgage, we are just setting the completion date and have had the valuation etc, now we have all the paperwork etc surely they cant remove it from sale now can they?!

Ytaya

I don't know if you've done the maths, but 10 years at £260/month is over £30,000 in repayments. For a £10,000 debt. Are you absolutely ok with that?

If you're managing with your current repayments, I'd consider sticking with them. You'll be debt-free quicker and you'll pay less in interest overall. Have you played with the snowball calculator?

loopyloulou_3

Ytaya, i never thought about it like that. just done my snowball and think you are right. maybe i should stay as i am, i just hate the "messiness" of having cc and loan, but it def isnt worth paying all that interest on!

Ytaya

I know how you feel. I've reached the point where I just have to sit tight and put up with it - I can't shift any more money to lower interest rates, I can't increase my monthly payments. The only thing I can do is just keep on doing the same thing. It feels like such a drag. But it'll get me there. I just keep my eyes on the debt-free date and remind myself how much interest I've already saved by over-paying and shuffling.

GettingThingsDone

Hi - just persuade yourself that there is no messiness to having a cc and a loan; it's just money 'out'.

I think lenders have exaggerated this idea of having a 'simple single payment' to cover up the fact that they are trying to do us.

Stick to the 'math' and keep up your good work!