Can't wait 30 years to be debt free!

Mick243 · 13 October 2013 at 9:57PM

I'm new to the MSE website, and couldn't find a thread with similar problems to my own so thought I'd start a new one to see if anyone has any suggestions or has had previous experience in the matter so here is my story.....

I currently have £25000 of personal unsecured debt. This consists of 3 credit cards, two overdrafts and a car lease. I'm paying the minimum monthly payments on all at a total of just over £600 a month (leaving me just enough money to get by each month although its very tight). This means, by my calculations it will take me well over 30 years to clear my debt, and that's if I don't spend any more!

The solution then I thought was simple. I shopped around on the net and figured out I could get a personal loan for £25k, clear it all and close everything, just paying the loan. Quotes were all about the same, monthly payments of well under £400 (freeing up £200 a month for whatever I wanted, perhaps I could even start saving some!) and making me debt free in 7 years instead of over 30.

Brilliant I thought! Looking at Equifax, my credit score is fab. All my debts are paid on time, no late fees or over limit fees. Steady income. So I applied expecting to be accepted straight away, but this was not the case.

Over the last 6 months I have applied to three different loan companies all with the same response, "You already have a high level of financial commitments".

Of course, I already know this - and it is the entire reason I am applying for the loan. Twice I have appealed against the decision stating that I would be paying £200 less a month and would be debt free in 7 years instead of 30 so it seems illogical not to take the loan - but no-one is interested!

Has anyone had experience of this or have any suggestions as to what to do? Any ideas of loan companies who might give an unsecured loan to someone with a high level of debt - even if it means a slightly higher interest rate? It seems that companies are not interested in helping out at all if you are up-to-date with your payments.

It is worth also noting that I have a joint mortgage with my partner, which is for 90% LTV so a secured loan is out of the question mainly because there is not enough equity but also because I don't want to put my debts under her name. She also has debts of her own although not in the scale of mine.

Any suggestions or help would be greatly appreciated.

M

Snowy_Owl · 13 October 2013 at 10:32PM

Loan companies don't think logical. They NEVER seem to think why you're taking the loan,only what you have - therefore they go yikes! we won't get our money and won't even discuss this with you!!

clive_e · 13 October 2013 at 10:40PM

yep it is a little illogical when you think about it, i suspect the problem is that the lender has no guarantee you will use the money to pay off the credit card debt. In theory you could spend it on a holiday for example.

I dont know if anyone knows of a system where some sort of contractual link can be made?

Mick243 · 13 October 2013 at 10:49PM

Clive, that's what I'm thinking. Someone who will lend the money as long as you prove the debts are paid off and accounts closed. Not sure such a thing exists

matttye · 13 October 2013 at 10:54PM

Snowy_Owl wrote: »

Loan companies don't think logical. They NEVER seem to think why you're taking the loan,only what you have - therefore they go yikes! we won't get our money and won't even discuss this with you!!

The loan companies see someone with a high level of debt and don't want to lend even more money - this is called responsible lending. They have no guarantee that the OP will actually spend the loan on clearing other debts.

If the OP goes and spends the £25k on something else, he will have £50k of unsecured debt!

I would say the companies ARE thinking logically.

WifeandMummy · 13 October 2013 at 11:00PM

I had the same problem, i applied for a consolidation loan last month which would significantly reduce my outgoings and would mean i was debt free in 5 years but got a no due to already having a high amount of borrowing :(wish i could give some constructive advice, will be interested to see what other people say x

Malkin157 · 14 October 2013 at 12:49PM

It is less risky for a company to have a loan with someone for say 7K than it is for them to have 25K.

Therefore you have debts spread across a number of lenders. No lender really wants to have all the debts of an individual in their name. More to lose.

John1993_2 · 14 October 2013 at 12:59PM

Snowy_Owl wrote: »

Loan companies don't think logical. They NEVER seem to think why you're taking the loan

Or, back in the real world...

The bank cannot insist that you clear your existing debts with the new loan, and knows that many people don't. They know that if you follow this route then you are almost certain to default, and so make the logical decision not to lend.

Also, why would they see someone struggling with loans to somoene else, and decide that it made sense for them to step in and face the risk instead?

simeyb · 14 October 2013 at 1:05PM

It's daft isn't it that when you select the "debt consolidation" reason in your application for a loan, they obviously don't take a blind bit of notice - you wouldn't have thought it hard to create an obligation on the borrowers side to pay their debts, or even the new lender sends the money straight to the other creditors - otherwise what's the point in asking what the loan is for?!

bargainbetty · 14 October 2013 at 1:33PM

The reason for the loan is not a legally binding section of the application. If it was, no problem! But it isn't. The lender cannot force the borrower to use the money to pay back their other debts, and therefore has to assess the loan on the basis of what the person can afford to pay back in additional to their current circumstances.

Mick, have a look at posting a statement of affairs, where people on here can offer advice on ways to cut back on your existing expenditure to throw extra at your debts. The snowball calculator will, if you fill in your debts and their APRs, show you the quickest way to pay things down.

Have a good declutter and sell your old stuff on ebay or at boot fairs to raise some extra. Do overtime, take a second job, look at maximising your income.

Have a look at your car lease. How long will it last before you can give it back? Can you cancel sooner? Can you find an alternative form of travel, or at least a cheaper one? My mate bought a Ford Probe for £500 six months ago, and it's a lovely little runner, so you might be able to find a cheaper can while you bring down your debts.

If you think it is worth trying, apply for a credit card with a low life of balance transfer - if you can reduce the interest on your debts, it is an immense help because you can pay off the capital debt rather than just the interest, and therefore clear it faster.

Ultimately, credit is a privilege, and the banks are not under an obligation to make it cheaper for you after you have signed up for it.

Good luck

sourcrates · 14 October 2013 at 1:37PM

I'm afraid in these hard economic times lenders are been more cautious now than ever before, TBH its not really an option for you to carry on with this level of debt, can you increase your income at all ? I know good jobs are hard to find, so I probably already know the answer to this one, the only other thing I could recommend to you is going down the debt management route, you could enter a debt management plan, but, its likely that will take almost as many years to clear the debt as paying what you are now, have you considered an IVA ? or, even bankruptcy ? in an IVA you would be debt free in 5 years, may involve re-mortgaging your property though in its final year, and as you own a house, bankruptcy may not be an option either, Mmmm, another thought, how long have you had the creditcard debts ? do they originate before 2007 ? unenforcabilly route may be an option if they do ? will trash your credit though ???