Snowballing Vs New Loan

Mizen79

Hi All,

I joined this forum after taking out a new (consolidation) loan last week. I then found this forum after some web-surfing.

Since being on here, I keep reading a lot of advice on "snowballing", rather than getting new credit to pay off existing debt. Is this just a "general" bit of advice that is given out by most, or do you believe it is the way it should be done in all cases?


The reason I ask, is because in the situation I WAS going to be in (without the new loan), it would have taken me about 4.5-5 years, at a cost of something like £42-44k to pay off my debts (mainly cards).

Now that I have the loan, it is going to cost me a total of £25k over 3 years, plus £700 in PPI. I have made terrible mistakes in the past, but surely I did the right thing for me!? (i.e. a few loan applications on my credit score, but saving all that money in interest).

Thanks for reading

somethingcorporate

The issue is with consolidation is that it leaves people with lots of unspent credit on their credit cards so often leads to having twice as much debt when this temptation becomes too much....

Obviously replacing expensive debt is worth replacing with cheaper debt as long as you keep paying it off and not increasing that overall debt level.

Mizen79

somethingcorporate wrote: »

The issue is with consolidation is that it leaves people with lots of unspent credit on their credit cards so often leads to having twice as much debt when this temptation becomes too much....

Obviously replacing expensive debt is worth replacing with cheaper debt as long as you keep paying it off and not increasing that overall debt level.

Yes I agree about the temptation. Something we have succumbed to before. But not this time. Absolutely not.

Cycrow

its about being disciplined and not using any existing credit.

by working on clearing your existing debt you can actually learn how to cut down on your outgoings and reduce your spending, because you have no choice.

whereas with just getting a loan, it can be seen as an easy option, and many people dont learn from it and end up with twice as much debt as they started with.

it can work, but most of the time it doesn't

Mizen79

Cycrow wrote: »

its about being disciplined and not using any existing credit.

by working on clearing your existing debt you can actually learn how to cut down on your outgoings and reduce your spending, because you have no choice.

whereas with just getting a loan, it can be seen as an easy option, and many people dont learn from it and end up with twice as much debt as they started with.

it can work, but most of the time it doesn't

I completely understand what you mean, but my repayments are going to be £695 a month (from now), basically the same as I would have been paying without getting the new loan (which would have started in January, once old loan completed). So I just cant see, for me anyhow, how I would have been benefited from staying as i was and shelling out SO much more money in the end

[Deleted User]

The concept of snowballing applies whether you get new loans or not. Always pay off the most expensive debt first.

Obviously if you only have one debt, then you throw everything at that one debt, but it's not an either/or choice. Get the cheapest debt you can, but still focus on paying down the most expensive.