To borrow or not to borrow?

ben-dover

That's the question?

Today has been a somewhat depressing day, Myself and Mrs ben-dover have been adding up our credit cards and two remaining loans and it does not make for good reading, unless you like judging people.

We have the best part of 16K tied up in several, read as lots, credit cards, and 5.5k of loans, having just cleared over 10k it's just not where I would like to be in my life right now..

We have only been paying the min on all of these for ages now. Most are on 0% or low APR. But I know its a juggling act that can't take much more before its all dropped.

Anyway enough back story. I could, subject to being accepted, borrow 20k and clear my debt and pay it off over 5 years, cost would be £380PCM, which is probably more than we currently pay. also we're saving nearly £400 a month since paying off our other loans.

or would I be best plodding on with my current situation and pay off all my highest rate cards first? I've never missed a payment, and no one is chasing me, why would they they're making a killing off me!

d70cw6

to consolidate or not consolidate.....

i think the major hurdle in paying off your various credit cards with a new loan, would be getting that large £20k loan in the first place - you're credit history wont look great and the lender would probably see you as high risk (read high APR).

ben-dover

My credit score is top notch TBF, always has been for the past five years. But an extra 20k on top of what I already owe is a bit much..

Caz3121

you would be classed as wanting to borrow £20k on top of your existing debt so a total of £40k+ (as there is no guarantee that you would use the loan to pay off your existing debt) you would need a significant income to qualify for that level of debt exposure

27col

Why do prospective consolidators seem to think that taking out a loan to pay off their debts is actually paying off their debts. They have just as much debt afterwards as they did before. It is just the lender that has changed. The borrowing is just as large as it was before the consolidation.
You should be paying down some the 0% cards with the £400 pm that you mention. You know the answer to your quandary. You stated it in your #1post.
Taking on more debt is madness in your situation. £400pm would rapidly reduce your indebtedness, and it needs to be done before the 0% period ends.

ben-dover

I know I would still have the debt, just one debt to pay rather than 10+ all coming out at different times of the month, I know I could probably bring them all in line but I'm normally out and calling 0845 numbers from my mobile is not cost effective.

The sensible approach is to start ploughing any extra onto my credit cards but it's hard when I don't always know what I've got coming in from week to week, so as long as I cover my min payment I'm okay but as they say this is "not getting the baby washed!"

I'll be honest though I've had enough of getting by now and really want to tackle this head on.

[Deleted User]

Caz3121 wrote: »

you would be classed as wanting to borrow £20k on top of your existing debt so a total of £40k+ ...

...you would need a significant income to qualify for that level of debt exposure

Exactly.

If you have enough income to be approved an additional £20k of borrowing, then put the additional income toward the existing debt.

No point paying £2,800 in interest, when most of your current debt is on 0%, or low APR.

When you say you are "saving nearly £400 a month since paying off our other loans", do you mean you have £400pm left over, after all payment and spending?

If so, run your existing debts through the Snowball Calculator (link below), to see how long (and the best order) to clear them, then add on the £400pm extra.

http://www.whatsthecost.com/snowball.aspx

I think you will be pleasantly surprised (more likely AMAZED), at how much that £400pm shortens the repayment time.

If you have (through necessity) been paying the minimum payments, and it is, as you say, "a juggling act", then you are unlikely to qualify for a 5.4%APR, £20k loan.

Perhaps also do a SOA.

http://www.stoozing.com/calculator/soa.php

RichL74

And the question is, if and when you borrow this £20k and pay off all the other cards, would you actually cut them up or save one for a rainy day then start smashing it again?

[Deleted User]

ben-dover wrote: »

I know I would still have the debt, just one debt to pay rather than 10+ all coming out at different times of the month

So open another bank account (with no card or cheque book, so you aren't tempted to dip into it on a whim), transfer all DDs for the debts to it, then set up a SO (for the amount you wish to put toward your debts) from your existing account, to your new account.

This is how I do it (except mine are bills, but the principle is the same), and it works .

If you don't want to move all the DD, do the reverse, and set up a new account, into which (the day after payday), you transfer enough to cover your monthly household expenses, leaving all remaining cash in the "debt paying account".

Whichever account you use for paying the debts, don't have a card or cheque book for it, but do get a paying in book, so you can pay in any "spare cash" you find you have, from time to time.

dealer_wins

Consolidation loans rarely work.

In my 20 year career at Lloyds I cant remember seeing a single case where someone took out a consolidation loan and after 5 years hadnt racked up more debts on loans/cards etc

The best way to get out of your situation is to cut back spending to the bone, live within your means, and pay off your debts as quickly as you can.

If that means dropping sky, expensive mobile phones, holidays, car upgrades and all other luxuries etc for the next couple of years then so be it.

Once you are free of debt save up and emergency fund and longer term fund (for car,holiday etc)

It will be a couple of years real hard pain and not many people have the will or discipline to do it, but it will save you literally tens of thousands of pounds in interest over the rest of your life (And no stress over money worries too)

[Deleted User]

ben-dover wrote: »

I'll be honest though I've had enough of getting by now and really want to tackle this head on.

Paying an extra £2,800 interest (even if you could get the 5.4% rate - more likely 15.4% or higher) isn't going to help you in that direction.

You existing debt, plus the £20k you wish to borrow, adds up to £41,500.

Do you earn £90,000pa ?