Debt consolidation

markie49

I have found myself in a position where I have run up 17000 on credit cards. I have a Fair credit rating and have tried everything I can to get another loan to consolidate all the debt - been refused everywhere. However been offered a secured loan from First Stop Loans to cover the lot with the repayments being way below my monthly repayments on the credit cards. Am I mad to take this out. Ive read post on here about DMP, I take it this stands for Debt Management Plan? How do I go about this, would his be a better option? Thanks in advance for any repiles, I really need to reduce my monthly repayments as Im getting further and further into debt.

Ilona

markie49 wrote: »

I really need to reduce my monthly repayments as Im getting further and further into debt.

Hello Markie. This seems a bit back to front to me. Should it be you need to reduce your monthly spending and increase your monthly repayments to get yourself out of debt.

It would be a good idea to post your Statement of Affairs and others will advise you of any cutbacks you could make.

You could contact Stepchange, a free debt management charity, to find the best way forward. Consolidation is never a good idea as you just move the debts around, and if you start spending on the cards again you will be in a worse mess. Someone will come along shortly with more advice. It is fixable so don't do anything rash before you have look at all the options. Good luck.
Ilona

HappyMJ

markie49 wrote: »

I have found myself in a position where I have run up 17000 on credit cards. I have a Fair credit rating and have tried everything I can to get another loan to consolidate all the debt - been refused everywhere. However been offered a secured loan from First Stop Loans to cover the lot with the repayments being way below my monthly repayments on the credit cards. Am I mad to take this out. Ive read post on here about DMP, I take it this stands for Debt Management Plan? How do I go about this, would his be a better option? Thanks in advance for any repiles, I really need to reduce my monthly repayments as Im getting further and further into debt.

It's silly...the representative APR is 49.5%. I really doubt your credit cards charge such silly rates. And you'd be securing your debt. If you run into trouble and cannot pay they will take your house away from you. If you fail to pay unsecured debts then they cannot take your house very easily they would have to take you to court to get a CCJ then you would have to continue to refuse to pay so they'd apply to the court to get a charge against your house and then again applying to the court to sell your house. This is very unlikely to end in you not having a house. Many creditors would just be happy to have the charge on the house left there until you sell the house when they would then get their money.

sourcrates

See this thread here, from someone who thought a consolidation loan was the way to go :


https://forums.moneysavingexpert.com/discussion/5044803


Say this had been yourself, your house would now more than likely be going through the repossession process.
Its not always a good idea to consolidate debt, especially with a secured loan, the risks are too great in this current financial climate.
I would advise you seek help and advice from either stepchange (who are a free debt advice charity, and will not charge you any fees) or National Debtline.
You mention a DMP might be the way to go, ask one of the above for advice on this, don't be tempted to go with any of the fee charging debt management companies who pray on people such as yourself, who have little knowledge in this area.

[Deleted User]

markie49 wrote: »

However been offered a secured loan from First Stop Loans to cover the lot with the repayments being way below my monthly repayments on the credit cards.

The lower monthly payments aren't the be all and end all of the matter.

What matters is how much interest you will pay, compared to how much you will pay on the cards, if you don't consolidate.

Firstly, I suggest you post a SOA (link below), so the good people (aka geniuses) of MSE can advise you on reducing your spending, which will allow you to free up more for debt repayment.

Next, run your debts through the Snowball Calculator (link also below), to see how much your debts will cost you to clear.

Finally, compare the interest costs of continuing to pay off your current debts monthly, compared to the interest you will pay on the First Stop Loan.

Also, whether you take the First Stop Loan, or continue paying the existing loans monthly, you must stop spending on the cards, or you will stay/end up back in deep debt.

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

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

ETA: I didn't realise it was a Secured Loan.

This being the case, I seriously doubt it's a good idea to consolidate.

National_Debtline

Hello there,

Turning unsecured into secured debt is seldom the answer. As the others have already mentioned, you'll create additional risk. If you cannot meet the instalments your house could be at risk of repossession. In effect, you would be turning debt that is currently regarded as 'non-priority' into what could potentially be a 'priority' debt.

It's worth remembering that a secured loan is simple another mortgage.

There are options which may allow you to pay a reduced amount each month to the creditors. Generally these options should also allow you to have your interest and charges frozen. A Debt Management Plan is one such option. You should only consider taking the route of reduced payments if you are unable to meet the current contractual minimum instalments. This is why completing a comprehensive statement of account (we call it a personal budget sheet) is such an important thing to do. It should ensure that you have enough money to live on, you can then see what's left for your creditors.

The statement of account link previously posted is useful as it allows you to post the figures here on MSE for us all to see and comment on. Alternatively, our financial statement meets the general and widely accepted industry standard: https://www.nationaldebtline.org/EW/steps/step2/Pages/Step_2_11.aspx

In addition, you can seek impartial, tailored advice about your best option via our online debt advice system, My Money Steps, here's a link: mymoneysteps.org

We also have an easy-to-follow 4-step guide to dealing with you debts, you can find it here: https://www.nationaldebtline.org/EW/steps/step1/Pages/default.aspx

I really hope you find this information useful,

Best wishes,

David @ National Debtline.

longtermplanner

I agree with the others. Turning unsecured debt in secured is rarely a good idea - the interest rate would have to be a lot lower than you are currently paying for it to be worth considering and the First Stop secured loans are extremely expensive. The fact the monthly repayments are lower is just becasue you would have this millstone around your neck for an extremely long time

There is a summary of your options after being turned down for a consolidation loan here: http://debtcamel.co.uk/debt-consolidation-refused/. If you can't reduce your expenditure so you can manage the monthly payments, then a DMP is almost certainly the best way to go.

The sooner you make the decision the better, rather than getting deeper into debt each month.

midlander81

Hi Markie, I am no expert in fact I am 40K in debt but part of the reason I got here is due to consolidating. It doesn't take long before you start using the credit cards again and before you know it you owe more than you started out with in the first place! Unless the loan is unsecured and a fantastically low rate, my advice would be to avoid consolidation.


Do you think that you could transfer some of the debts to 0% credit cards?

[Deleted User]

midlander81 wrote: »

Hi Markie, I am no expert in fact I am 40K in debt but part of the reason I got here is due to consolidating. It doesn't take long before you start using the credit cards again and before you know it you owe more than you started out with in the first place!

Plus, there's the other stumbling block, where your bank manager says "We could give you a loan with lower monthly payments".

Mort

markie49 wrote: »

I have found myself in a position where I have run up 17000 on credit cards. I have a Fair credit rating and have tried everything I can to get another loan to consolidate all the debt - been refused everywhere.

If you are being refused applications for new credit your rating is likely to be heading towards the poor end of the spectrum, multiple applications in a short period of time may also raise your risk profile.

markie49 wrote: »

However been offered a secured loan from First Stop Loans to cover the lot with the repayments being way below my monthly repayments on the credit cards. Am I mad to take this out.

Possibly desperate would be a better word. Over the years I consolidated three times and each time ran up new debts. Currently my only debt is a mortgage which is the remnant of the last failed consolidation attempt. Instead of being mortgage free by the age of 50 I will be about 65 when it is done, ignoring overpayments.

markie49 wrote: »

Ive read post on here about DMP, I take it this stands for Debt Management Plan? How do I go about this, would his be a better option? Thanks in advance for any repiles, I really need to reduce my monthly repayments as Im getting further and further into debt.

It sounds like you are in what Martin Lewis calls a debt crisis as you are unable to meet your repayments, a DMP is one way of sorting out your situation as is an IVA. You should really some advice from somebody like Payplan or Stepchange, who give free advise, don't be tempted by one of the companies who charge for their service.

Nargleblast

Two things....firstly, never, ever be tempted by a secured loan, as you risk losing your home. And secondly, an unsecured loan for consolidation only works if you close all your card accounts and destroy the cards. I made that mistake, accepted consolidation loans from my bank but kept using the cards and ended up first with a DMP then an IVA. Which I am happy about, as it is a workable solution to my huge debt problem, but if only I had had the sense to get rid of those damn cards in the first place!