Should I consolidate?

LeChuck101

Hi everyone, long time lurker here. I have used everyone's good advice over the years so thank you for that.

I have currently £14,421 outstanding 1 overdraft (£2000), 1 family loan (£3000) and 4 CC's (£the rest). The credit cards are all on 0% BT's at the moment, the family loan is interest free and the overdraft will start charging soon as it's an old student account. Currently paying back about £400 p/m for the whole lot.

Me and the OH are contemplating a consolidation loan, I realise the first instinct to this question is no/never, however we feel like it might compartmentalise the debt where at the moment I feel like it's all I ever think about.

The background to the debt is that we got married years ago when we couldn't really afford it and then got into more debt whilst one of us was at uni and we were living off 1 wage. However we're both now working full-time and can afford to pay off the debt little by little.

I do feel like I would be sensible and cut up all of the cards. I was hoping there might be someone who has some insight into our decision.

Many Thanks

Roland_Sausage

If you consolidate it will cost you more as you would be paying interest on the whole amount, rather than just the overdraft.

A far better approach would be to snowball what you can afford starting with the overdraft, then possibly the family loan. Attempt to transfer the credit card debts to other 0% cards when they are approaching the expiry of the offers.

Tink_04

If its all 0% I wouldn't - why not choose a card/overdraft to try and clear 1 at a time (the one which is going to start costing the soonest) and throw all you have at it? I'd post and soa too so you can see how much you have to play with each month! Good luck x

Tink_04

Oh and definitely cut the cards up

LeChuck101

Thanks for your response guys.

I guess consolidation is the easy way out, but in the long term is more painful.

I think I was after a sanity check, sometimes you can overthink something and make it seem like a good idea. But I will carry on snowballing, just waiting for the snowball to get bigger.

I only keep the cards for reference for when I do BT. But I should put all their numbers into a spreadsheet and cut them up. That sounds like it might be quite enjoyable actually. I do keep a daily outgoings tracker and plan everything for the month down to the pound so I know what I can spend/pay off.

Sanity check received. Thanks guys

NHS_worker_bee

LeChuck101 wrote: »

I do feel like I would be sensible and cut up all of the cards. I was hoping there might be someone who has some insight into our decision.

Cut up the cards (if you haven't already?) but don't consolidate. What does the snowball calculator say, is getting debt free by snowballing achievable for you? You will find invaluable advice on this forum to help you on your debt free journey too, which may even allow you to cut back on outgoings and overpay on the debt.

Best wishes

[Deleted User]

LeChuck101 wrote: »

I guess consolidation is the easy way out

As someone with the T-Shirt, I can assure you, it's anything but the easy way out.

LeChuck101

I've done the snowball calculator and if I can pay off £400 p/m consistently then I'll be Debt free by October 2017, if I can pay off £500 p/m then it'll be Dec 2016. Now there's an incentive!

Thanks again everyone

FireWyrm

As a matter of course, I would cut up all credit cards anyway and draw a line under this. Consolidation rarely works as you have been advised, but the biggest danger is in fact continued unsupported spending on a credit card. By all means, 'compartmentalise' the debt, as you have done but using the snowball method rather than consolidation. In the meantime, a thorough audit of your outgoings will highlight where and how you are overspending and thus, you can put plans into place to cover any such emergency that you might once have used a credit card to cover. This situation is the danger and one that should not be discounted. Cars breaking, boilers going on the blink, holes in the shoes are a fact of life and should be included in your future plans going forwards. To that end, a complete re-think of how you budget and allocate money should be high on your priority list along with some decent method of meticulously tracking spending. There are various methods available in our computer age, software, excel, online aggregations etc. You will doubtless see the letters 'YNAB' mentioned a lot. I strongly advise you look into this and download the trial to decide if it will work for you.

Consolidation loans do not work, but a complete rethink of your finances and how you budget will work and will pay dividends in the long run.

LeChuck101

FireWyrm wrote: »

There are various methods available in our computer age, software, excel, online aggregations etc. You will doubtless see the letters 'YNAB' mentioned a lot. I strongly advise you look into this and download the trial to decide if it will work for you.

Thanks Firewyrm, I had my LBM a few months ago and I've been tracking everything in excel since so I know exactly where the money is going (beyond what the bank statement is telling me).

I've just read through the 4 rules on YNAB and they are very informative and it's encouraging to know that I'm following some of the rules already.

I have created a budget but I hadn't given every pound a job (to quote the website), I also have found it very difficult to persuade my OH to try and stick to the budget.

Anyway, I take everyone's advice on board about the consolidation, I'm not going down that route now.

Thanks again

FireWyrm

If you are interested, the OU has a free course that has just started this week. You could sign up for it : https://www.futurelearn.com/courses/managing-my-money