Loan consolidation - are there any disadvantages

misterjingles

Seriously considering loan consolidation - quite a few high apr loans under our belt. Surely it makes sense to consolidate onto 1 low apr deal. Any good consolidation calculators out there ??

[Deleted User]

It makes sense only if you can get one at a lower rate than you are currently paying, which is generally not the case. And of course if you change your spending habits so as not to run up further debts.

Thrugelmir

From the borrowers perspective no. Lenders are now taking a very harder line. In order to avoid any issues under the new regulations.

puglet

Use a Debt Consolidation calculator for this. If your new APR is less than the blended APR of all your debts to be consolidated then that's test 1 - you'll be saving money. Next make sure the total interest payable over the term of the new loan is not more than the interest payable on all your existing debts - test 2, again saving money.

Finally, other important considerations ....cashflow! how much will you save on the new monthly payment and how many of your existing facilities are revolving (ie credit cards), replacing revolving facilities can be both risky on the one hand and detrimental to cashflow on the other. The risky part is you don't close the credit cards you've consolidated and use up that credit again over time making your debt much worse than before. The detriment is that you close the consolidated credit card/s and then lock yourself into fixed payments with nil ability to redraw on payments if money becomes tight for any reason. You have to be committed to consolidate so think it through carefully.

chambta

Thrugelmir wrote: »

From the borrowers perspective no. Lenders are now taking a very harder line. In order to avoid any issues under the new regulations.

This is correct. It's now assumed for affordability purposes with RBS & Natwest than debts being consolidated either won't be or will be run back up.

DCFC79

You need to find out if you can even get a loan to consolidate first before anything. I'll say no chance but that's with limited details posted. Disadvantage is you will not pay the loans off.