Loan to consolidate debt??

rockie321

Hi,

My boyfriend and I are both 23 and haven't managed to shake off our student overdraft and credit card debt, we've been actively trying to pay these off since January this year, but however much we try and be careful with our money, as well as budget how much we can spend, we're still not getting out of it.

My boyfriend is in much bigger debt than me (approaching £3.5k) and it's really getting him down now.

He has decided he wants to take out a loan to pay off this debt (which is currently spread across 3 bank accounts), he thinks that consolidating his debt into one loan and then paying that off over the next year (or preferably 6 months) is the solution.

I am dubious, and unsure if this is a good idea. Can you please give us some advice?

Thanks!!

Gaz83

If you are budgeting as carefully as possible, and still not servicing the debt, then you have one option:

Spend less or earn more. It really is that simple.

If you're in (say) £5k of debt, what makes you think that a consolidation loan can be paid off in a year that can't be done with the existing cards and overdrafts?

CLAPTON

rockie321 wrote: »

Hi,

My boyfriend and I are both 23 and haven't managed to shake off our student overdraft and credit card debt, we've been actively trying to pay these off since January this year, but however much we try and be careful with our money, as well as budget how much we can spend, we're still not getting out of it.

My boyfriend is in much bigger debt than me (approaching £3.5k) and it's really getting him down now.

He has decided he wants to take out a loan to pay off this debt (which is currently spread across 3 bank accounts), he thinks that consolidating his debt into one loan and then paying that off over the next year (or preferably 6 months) is the solution.

I am dubious, and unsure if this is a good idea. Can you please give us some advice?

Thanks!!

do you actually have a budget
do you track what you spend(keep a spending diary and write down absolutely everything you spend)
do you compare the two to discover where your are overspending


what is the result?

rockie321

Hi thanks so much for your reply.

I think I agree.

However, putting aside whether or not it will help pay it off any quicker etc. is it a BAD idea? Are there any big cons with doing this? E.g. will it look bad to a mortgage adviser?

Thanks!

Gaz83

rockie321 wrote: »

Hi thanks so much for your reply.

I think I agree.

However, putting aside whether or not it will help pay it off any quicker etc. is it a BAD idea? Are there any big cons with doing this? E.g. will it look bad to a mortgage adviser?

Thanks!

The main drawback is that if you have £5k of debt, spread across different cards / overdrafts, and look to borrow £5k to consolidate them, a lender will usually assume the worst - that you won't consolidate, will buy something shiny, and end up with £10k of debt.

So the big con is that a lender won't always give a consolidation loan, and when they do it can be at a high APR.

It's never a good idea to take on more major credit if you're planning on getting a mortgage any time soon. It will impact on affordability.

rockie321

CLAPTON wrote: »

do you actually have a budget
do you track what you spend(keep a spending diary and write down absolutely everything you spend)
do you compare the two to discover where your are overspending


what is the result?

CLAPTON wrote: »

do you actually have a budget
do you track what you spend(keep a spending diary and write down absolutely everything you spend)
do you compare the two to discover where your are overspending


what is the result?

I made a spreadsheet detailing my direct debits, how much I can afford to pay off that month, and how much disposable income I have, then I take out say £100 a week and I'm allowed to spend that and that only - this has worked for me, and I am almost at the £0 mark.

But my boyfriend is less organised/sensible, and is having more difficulty controlling his budget.

Is the solution to get out a loan and set up a direct debit (as such) and pay that off each month?

Or is the solution to pay it off manually and I help to manage his budget more closely?

rockie321

Gaz83 wrote: »

The main drawback is that if you have £5k of debt, spread across different cards / overdrafts, and look to borrow £5k to consolidate them, a lender will usually assume the worst - that you won't consolidate, will buy something shiny, and end up with £10k of debt.

So the big con is that a lender won't always give a consolidation loan, and when they do it can be at a high APR.

It's never a good idea to take on more major credit if you're planning on getting a mortgage any time soon. It will impact on affordability.

This is really helpful, thank you for this. I will discuss this with my boyfriend and see what he thinks.

I can't thank you enough for your advice/insight.

DCFC79

Why not help him to manage it like you do.