why is everyone so anti consolidation?

debtfree1day

Hi

First of all this is not a dig at anyone just a genuine question

Having posted on here I have 76k of expensive debt which is exceedingly diffiuclt to shift to zero / cheaper options, but apporx 50k in equity in the property I have been steered away from remortgage up to 100% (of even 95) of property value, which I would have thought would have allowed me to clear really expensive debts (25%+) and sturcutre the repayments in a realistic fashion

Understand that debt is paid over longer time, but at say 7% and with ability to overpay, not sure thats that big an issue

Also, note advice to alot is around the fact that a secured debt on property could mean losing home, but ultimately if we dont clear our debts we will end up with IVA's or Bankruptcy which means the same, so isnt it better to consolidate into 1 debt?

I know it wont be right for everyone, and I am no expert ( i need help!) but as a little devils advocate could the anti - consolidation advice be overdone?

Good luck all

Lisa

(7 Mystery shops and £43 extra income this week!)

magni

Generally when people consolidate they just run up more debts on cards and end up worse off than they were before. It can work if you are really strict with yourself.

SarahNeedle1872

The problem I had with consolidation (and this is similar to a lot of people on here) was that not long after the consolidation loan cleared my CCs, I started spending again, so my £4.5k CC debt became a £5.5k loan and another £3500 CC debt. Consolidation does give u one easy payment etc but it doesn't tackle the reasons why the debt is there in the first place. I don't know much about secured loans as I don't own a house, but what I do know is that u end up paying far more interest because the debt is spread to the same length as ur mortgage. Take a look at the Picture advert on tv.... she borrows £25k, but total repayment is just under £49k - that's nearly twice what she borrowed.
What u decide to do for your family is purely your decision as only u know ur situation, but I'm afraid u will hardly find any consolidation fan here.... You will find lots of ideas and support tho!

Sarah x

kevster1009

Well to be honest...I had a 10k OD, a 5k OD and a 3.5k CC with Lloyds, they consolidated it at 7.7% for me and this works. I dont spend anymore so that's the key I guess, but it worked for me.

Kev

brainfreeze

I'm a reformed consolidator .....consolidation is how my unsecured debts got to £64k (were probably higher than that at one time...but that's the figure it was when I was brave enough to take a hold on it).

I have more than enough equity in my home to clear all this - and earn enough to borrow against the property to this additional level, but I feel I need this learning period of discipline with money to ensure that the cycle is broken. I will never borrow money against my home that is not specifically going towards specifically increasing the value of my bricks and mortar, ie extension or house move.

It is an individual choice, but at the end of the day I think you will find that most posters on here have learnt the lesson the hard way and therefore would always advise others not to consolidate.

ManAtHome

I think Magni got it in a couple of sentences - difficult to resist the temptation to start spending again.

The big problem with upping the mortgage percentage is that it makes re-mortgaging more difficult - you may find yourself locked out of the best deals (mind you, the worst mortgage deals could be better than the best loan deals...).

Do the sums, be sensible... good luck.

LookingAhead

I think it can only truly work if you refuse to use credit again and you have have have to have it imprinted on your mind that you have to live within your means and the odd £20 here & there *does* matter.

Holidays you (not you personally) can't afford are out of course and as soon as you hear that little voice saying "....but if I spread the payments out over a few months...." you know you're flirting with disaster again.

You also have to be able to save like a demon for all those unexpected bills, car servicing etc.

Otherwise it's all too tempting to get into the cycle again.

Basically it's a total lifestyle and 'mind style' overhaul.

Are you up for that?

debtfree1day

I hear you.....you use all the equity in your house, then run up debts - you really have got no where wlse to go

I dont want too, as over the last few months and got spedning under control, and demonstrated income now exceeds outgoing, and began to make progress, BUT I have one credit card company as an example who just upped Interest rate from 15.9 to 24.9% after argueing (pleading) I got them to go to 21.9%

Min payment went up from 85 to 115 pounds a month of which 102 is interest...in other words I end up reducing level by £13................aaaargh

On top of this has 2 unsecured loans which together cost me £1080 per month and paying them means I cannot live (withour borrowing elsewhere at higher rates....)

so somehting has to change
lisa

Sea78

Have you talked to someone like CCCS about it? I don't know whether getting a secured loan would really be the best option. I am in a Debt Management Plan - thought about remortgage but a)OH would not have been stopped and the whole attitude to money would not have changed and b) was terrified of ending up in negative equity - I mean - what's the point? So I went for a DMP - it's meant that I have poor credit rating BUT it also has meant that most of my payments are actually going off the debt not the interest which has been a real bonus.
Might be worth considering?
Sea xx

grey_lady

A poll taken of people who had done exactly that found that 85% went on to run up debts again after they had taken out the secured loan, then they started to struggle to meet repayments. Im sure most of them didnt intend on that happening either. So considilation worked for a few (and was possibly more expensive in the long run as well) but it just make things worse for the rest.

Hth

kathfisch

Another trouble with consolidation into a loan with fixed monthly payments is just that - no ability to overpay (on most loans). Ok, so you can save up money and hope to pay the balance early but, realistically, any extra's going to get spent. When you're trying to clear a huge debt as fast as possible even small amounts really do make a difference, that's a great motivator. You can see the balance coming down and the interest payments reducing and your dfd getting closer.

And, equally, if you have a crisis one month you can make only minimum payments and use the surplus for your crisis, rather than take out more credit for it and re-enter the nasty spiral.