Taking out a personal loan to pay off debt

[Deleted User]

fatbelly wrote: »

Once you have consolidated you will have a credit card with zero balance and 3k credit limit, and an overdraft facility of maybe 2k, and no overdraft.

There's another danger, of which I'm personally familiar.

You take out the loan and clear the CCs, overdrafts etc.

Then, one day, you are chatting to your bank manager, who says something to the effect of "We can offer you a better deal on that loan, which will reduce your monthly payments by £xx".

You think "Great. That gives me an extra £xx in my pocket/wallet/account each month."

Trouble is, you've just reset your loan to square one.

thecassman86

Bedsit_Bob wrote: »

There's another danger, of which I'm personally familiar.

You take out the loan and clear the CCs, overdrafts etc.

Then, one day, you are chatting to your bank manager, who says something to the effect of "We can offer you a better deal on that loan, which will reduce your monthly payments by £xx".

You think "Great. That gives me an extra £xx in my pocket/wallet/account each month."

Trouble is, you've just reset your loan to square one.

Boy, does that sound familiar

[Deleted User]

I'm ashamed to say it thecassmanBoy, but I did it twice.

I know I sound like a right prat but, when you have been paying more than half your salary toward your debts, for 2 years, the idea of having an extra £50-ish in your wallet, each month, sounds incredibly attractive.

thecassman86

Bedsit_Bob wrote: »

I'm ashamed to say it thecassmanBoy, but I did it twice.

I know I sound like a right prat but, when you have been paying more than half your salary toward your debts, for 2 years, the idea of having an extra £50-ish in your wallet, each month, sounds incredibly attractive.

I hear you. Same here. Just the once but for the same reason. The extra £100 per month became more tempting than the much shorter loan - it's not like i actually needed the extra cash each month either! :doh:

[Deleted User]

A bit of sage advice for the OP.

Only a fool learns from his own mistakes. The wise man learns from the mistakes of others.
(Otto Von Bismarck)

GingerFurball_2

Loan approved, just a case of waiting for forms and signing them and sending them back.

As soon as the money arrives I will be making an appointment to close my Co-operative account, and a condition of the loan is that my credit limit is reduced to £1,500.

thecassman86

That's great! As previously mentioned, making the majority of your payments go towards the actual debt rather than the interest is a good move.

Just remember to keep in mind the pitfalls of consolidation...! It takes discipline but keep off the credit cards and pay what you can towards that loan!

All the best

GingerFurball_2

fatbelly wrote: »

The problem with consolidation is mainly psychological.

Once you have consolidated you will have a credit card with zero balance and 3k credit limit, and an overdraft facility of maybe 2k, and no overdraft.

For many that's just too tempting and a few months down the line they will have the loan, plus a 2k credit card bill and a 2k overdraft.

My credit card limit is now £1,500 and I've removed the overdraft facility from my co-op account so that's no longer available to me to spend, so hopefully that should be the biggest potential pitfalls of consolidating avoided.

thecassman86

GingerFurball wrote: »

My credit card limit is now £1,500 and I've removed the overdraft facility from my co-op account so that's no longer available to me to spend, so hopefully that should be the biggest potential pitfalls of consolidating avoided.

Just out of interest, is there any particular reason you didn't lower it further? Or close it completely?

GingerFurball_2

thecassman5016352 wrote:

Just out of interest, is there any particular reason you didn't lower it further? Or close it completely?

Because a credit card is useful to have if managed properly.