What is the point in debt consolidation loans?

Globetrotter86

Hey all, i am currently paying off a total of £8000 worth of credit card debt (yes,bad i know) against a £20,000 salary with an average debt repayment of £500 a month. Up until recently, all of this debt was interest free, however now about £6k of it is costing around £90 a month.

Here is the trap.

I can't get another card to balance transfer to because i owe too much on cards already. Ok, understood (and i don't want extra available credit anyway).

I can't get a loan to repay these debts because the bank thinks i will end up owing £8000 + the new loan (which is too much for my salary).

So, what is the point in a debt consolidation loan, when they don't consider the fact that the loan is paying off the credit cards. Surely there could of been some arrangement where they pay off and close your CC's? therefore eliminating the risk of you simply racking up your CC's again whilst you have a loan.

I don't have a mortgage, so i can't secure it against assets.

I have a very good credit rating, and have not missed any payments in the past, but the best "debt consolidation" loan i can get is 45 percent APR, which is obviously not needed for someone who pays off a 17 percent interest cc.

I presume the only way out of this inflicted high interest trap is to simply pay off as quickly as possible, but i could really do with that £90 interest being more reasonable (£30-40), that way i would will be paid off a few months sooner.

Any advice is much appreciated.

Thrugelmir

For a period of time cut your outgoings to the bare minimum. Every penny you can find repay your debt. The quicker the capital balance owed falls the less interest you'll pay. There's no magic. Just bloodly hard work. You'll reap the results based on the effort you put in.

DCFC79

As been said it can be done but takes hard work not to spend that little extra on something you may have bought in the past eg a pack of beer.

Pixie5740

The point of debt consolidation loans is to keep you in the debt death spiral.

I have been in your shoes and the best way (for me anyway) to get out of it was to snowball my debt.

This snowball calculator will demonstrate what I mean and give you an idea of when you'd be debt free. :j

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

moohound

Repeatedly consolidating got me into the mess I was in, are you using the snowball technique?

somethingcorporate

Debt consolidation loans (in fact any loans) are very rarely for the benefit of the recipient!

Tixy

Globetrotter86 wrote: »

Surely there could of been some arrangement where they pay off and close your CC's? therefore eliminating the risk of you simply racking up your CC's again whilst you have a loan.

Financial institutions simply don't work together like that. They are in direct commercial competition with each other so why would Card lender A agree to let lender B close down your credit card account. Card lender A wants you to keep your credit card account open and wants to continue to earn money from your transactions.

There used to be some companies who would offer loans for consolidation and offer to repay your older loans directly.
There were problems with these and instances when people found the transactions hadn't been correctly administered and a couple of years down the line found they were being chased for the old debt as well as having to pay the new loan and struggling to prove where the funds had been paid. Or finding that some trailing interest was left over and unpaid and that this had been recorded on their credit file for months as an unpaid debt.

Tixy

Globetrotter86 wrote: »

I presume the only way out of this inflicted high interest trap is to simply pay off as quickly as possible, but i could really do with that £90 interest being more reasonable (£30-40), that way i would will be paid off a few months sooner.

Any advice is much appreciated.

Do you have any room to shuffle your existing debt around? Any unused limits on cards that will offer you balance transfer deals for part of the debt? Any old credit card accounts that are still open but with nil balances that you may be able to get balance transfer deals from?

Aside from those options then really it is as you say, just to pay off as much as you can each month to clear them as soon as possible.