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Make a debt consolidation loan work?

Ebonydeluxe
Posts: 99 Forumite


Morning all,
I have really been working on reducing my debts (more than halved them). It has been difficult and I have had a few setbacks, but overall I have put myself in a better situation, not great but better than sleepless nights and tearful episodes.
I applied and have been accepted for a loan to consolidate all my debts which will mean lower interest and one payment to think about rather than six of varying dates, which I occasionally missed. I think I have become eligible for this loan because I have been clearing my debts and have less creditors (my situation was dire).
I have already decided that taking the loan is the best thing to do for my situation, 7.1% vs 24.9-39.9%. What I don't want to do is repeat the same cycle I used to. I know I can do this if I stick to my new way of thinking about money. I don't need to buy anything accept food and pay bills. I also want to start saving.
What I would like to know from this supportive community is what advice you have on making the consolidation work as opposed to not. I have read about them not working, but I really want it to work. I don't want that Euphoric feeling of feeling I have cleared my debts when all I have done is transferred them somewhere else. Hopefully when I am saving I will be able to settle the loan earlier, providing there are no penalties.
I want to get back to the old me who used to budget and save for things.
Thanks in advance.
Ebony:)
I have really been working on reducing my debts (more than halved them). It has been difficult and I have had a few setbacks, but overall I have put myself in a better situation, not great but better than sleepless nights and tearful episodes.
I applied and have been accepted for a loan to consolidate all my debts which will mean lower interest and one payment to think about rather than six of varying dates, which I occasionally missed. I think I have become eligible for this loan because I have been clearing my debts and have less creditors (my situation was dire).
I have already decided that taking the loan is the best thing to do for my situation, 7.1% vs 24.9-39.9%. What I don't want to do is repeat the same cycle I used to. I know I can do this if I stick to my new way of thinking about money. I don't need to buy anything accept food and pay bills. I also want to start saving.
What I would like to know from this supportive community is what advice you have on making the consolidation work as opposed to not. I have read about them not working, but I really want it to work. I don't want that Euphoric feeling of feeling I have cleared my debts when all I have done is transferred them somewhere else. Hopefully when I am saving I will be able to settle the loan earlier, providing there are no penalties.
I want to get back to the old me who used to budget and save for things.
Thanks in advance.
Ebony:)
:naughty
Hoping to be debt free for life!

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Comments
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If you decide to go down the consolidation loan route then in my opinion a budget is essential to ensure the funds are available for your repayments. Would be a shame for your debt to spiral out of control again due to missing payments.DFD - 12/2016 with 6.7% paid as of 07/14
£ saved = 168.16 lbs lost = 4
Weekly Spend Challenge(7/9) £20/£0
Sept GC - £78.11/£300 Sept NSD's = 4
OS Weight Loss Challenge - 0lb/5lb0 -
You have to make sure you don't slip back into your old ways, its very easy to do if you are not disciplined.
You seem to have done well so far, and in the short term the interest rate may be lower, but will you end up paying more back in the long run ?.
Consolidation loans can be a minefield, as its all too tempting to take out the credit you used the loan to repay, again.
Just keep in the same frame of mind and things should be ok.I’m a Forum Ambassador and I support the Forum Team on the Debt free wannabe, Credit file and ratings, and Bankruptcy and living with it boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.For free non-judgemental debt advice, contact either Stepchange, National Debtline, or CitizensAdviceBureaux.Link to SOA Calculator- https://www.stoozing.com/soa.php The "provit letter" is here-https://forums.moneysavingexpert.com/discussion/2607247/letter-when-you-know-nothing-about-about-the-debt-aka-prove-it-letter0 -
Close off your cards etc so you can't run them back up.
Agree living with a budget is key so why not share your new soa here for feedback?Debt at highest: £8k. Debt Free 31/12/2009. Original MFD May 2036, MF Dec 2018.0 -
Thanks for the advice so far. I am going to sit down and write a budget with my 12 yr old daughter. She will ensure I stick to it. She is very good at saying "Mummy, do you need it?"
I think the best thing is to close down the cards. Do I need to keep one with a low limit for emergencies, at least for the short time until I can build up a saving pot? By emergency I mean car breakdown. Or no, bad idea? Keep the card in my house or give it to my sister and tell her not to hand over unless I can prove the emergency.:naughtyHoping to be debt free for life!
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Ebonydeluxe wrote: »
Do I need to keep one with a low limit for emergencies, at least for the short time until I can build up a saving pot? By emergency I mean car breakdown.
The whole point of having a workable and realistic budget is that you forsee such 'emergencies', make contingency plans and are prepared. If you need a card for 'emergencies', by definition, your 'budget' is inadequate and requires further work. Cards are a trap and will lead to failure on the consolidation loan plan.Ebonydeluxe wrote: »Or no, bad idea? Keep the card in my house or give it to my sister and tell her not to hand over unless I can prove the emergency.
Freeze them in water if you must. Personally, I'd simply cut them up.
What 'emergencies' can you foresee anyway? Is there really a good chance of a car breaking down within say, the next 6 months? If not, then put sufficient money aside each month into a 'pot' to cover that particular contingency. Birthdays, Christmas, MOT, annual expenditure - all the same principle. Your budget is a failure from the start if you have not at least assessed the risk and tried to put some plan in place to deal with it, even if it is only a partial one at the moment.Debt Free! Long road, but we did it
Meet my best friend : YNAB (you need a budget)
My other best friend is a filofax.
Do or do not, there is no try....Yoda.
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You could cut up the card but keep one account open with a low limit while you save your emergency fund. That way, if you need to use it you will need to ring up and say the card is lost and wait for a new one to come - which you will only do in a dire emergency.
Having said that, I do have one. It is set to pay in full by DD if I do use it, but I haven't needed to for 6 months (since I started using YNAB, in fact). I have used it once or twice to "keep it open" and I tend to transfer the money straight away rather than waiting for the bill date as I hate having anything on it. It's useful for hotel bookings etc who place a hold on your card.
Depends how disciplined you are I guess.LBM:1/1/12Debts @ LBM:£43,546 :eek: Debts now: £9,486 :cool: 78% PAIDFound YNAB 1/2/14 - the best thing EVER!0 -
You need to have massive willpower to do it correctly. I consolidated my wife's debts last year into one loan.
What I have done is kept up the same repayments, though. So instead of having four different debts paying a total of £300 per month to them at various rates (up to 29%), I now I have one loan at 4.5%. But I'm still paying the £300 to it in order to get it paid off quickly. It's a good way to get rid of it quickly if you're able to commit to the same payments and will get it paid off far quicker."Facism arrives as your friend. It will restore your honour, make you feel proud, protect your house, give you a job, clean up the neighbourhood, remind you of how great you once were, clear out the venal and the corrupt, remove anything you feel is unlike you... [it] doesn't walk in saying, "our programme means militias, mass imprisonments, transportations, war and persecution."0 -
Thanks for all the practical advice. I will cut up the cards, then close them down. I will read through the T&C about overpayments. I was paying out about £550 per month, which was more than the minimum payments required, but the debt wasn't shifting as fast as I would like due to the high interest rates. If I had found a 0% balance transfer offer I was eligible for, this would have been more ideal as I would probably have paid the debt off in 2 years.
I used to be so money savvy. I once made £50.00 last me a month because I was budgeting so hard. But times changed, I had children and lost track of the spending. I remember posting on here when I had my LBM and the advice was sound.
Now I am on track and only looking onwards and upwards.
What can I do when I am feeling down and feeling that urge to go shopping? Not on the credit cards. From my wages but know that the money could be put to better use. In other words getting rid of the attitude "Live for today and not for tomorrow" IYKWIM.:naughtyHoping to be debt free for life!
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Advise I have seen many times is to allow yourself a treat budget which helps ease the 'down' feeling of debt repayment. Now, I don't mean a massive splurge a month but something you can work into your budget. Perhaps a £5 at the beginning of the month for some nice bubble bath, a bottle of wine, chocolate and a DVD, whatever works for you. Also, you need to change the mindset of spending to make yourself feel better. Think of something free to do instead, a walk with your daughter, a picnic in the park or garden, a nice bath with a book, do your nails etc etc.
if you have a long term aim after your DFD, print out a picture of this, keep one in your purse, kitchen, by your laptop, in the car, everywhere where you might be when you feel down to remind yourself what you have to look forward to after this temporary period.
You've done well so far, keep it up and enjoy looking forward to your DFD XFeb 2015 NSD Challenge 8/12JAN NSD 11/16
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UNDER NO CIRCUMSTANCES accept an offer to refinance the loan, to:-
"give you a lower monthly payment."
All it will do (and I speak from bitter experience) is extend your repayment period.0
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