Consolidate credit card debt with loan?

stupot101

Hi, I have three credit cards all with APRs of around 18%, with a combined balance of £6400. I'm only able to pay the minimum monthly repayment on each, totalling £158 a month.

So I'm thinking of taking a personal loan to pay all three off. The cheapest quote I have is 9% over five years. Which would be £131 per month. The chance of me paying off the credit cards over the same period is nil TBH.

So ... good idea or not?

MJP43

What about transfer to a 0% card?

You can check eligibility with Fluid Credit Card without leaving a footprint.

They are doing a 26 month 0% deal at the moment.

Pixie5740

Debt consolidation will only work if you understand how you got into debt in the first place and can ensure it won't happen again (i.e. Change your spending habits). If you can do this then debt consolidation might work. You'd also have to cut up your credit cards and close the accounts as soon as you paid them off.

Mirno

Mathematically - yes(*).
Psychologically - probably not.

You managed to use up the credit before, and once you get the loan it'll be there again - ready to tempt you. So before you take out a loan, ask yourself what's changed? Why will this time be different?

(*) This is based on the fact you've told us you're going from a ~18% credit card to a ~9% loan, and with no further information on you, your potential earnings over the next 5 years and all the other subtleties of finance.

Foxy-Stoat_3

^^^^^^^^^^ What he said.

Taking out a loan, if you can get one, will address the effect, not the cause.

Tixy

Are you still spending on the cards? when was the last time you made a purchase on them?

As others have said consolidation will only work if you are no longer spending more than you have coming in and if you can be certain that you won't use the cards and run up additional debt (most people think they won't but quite a lot of people do gradually build up more debts again - so I'd only do it if you are going to cut up the cards, or have done so already).

If you can afford £158 a month and do decide to go for a loan then why not take the loan out over 4 years rather than 5? assuming an APR of 9% then that would be £158.20 a month.

stupot101

There were various causes of the debt building up, all of which are in the past or have been addressed. The debt wasn't the result of overspending. Two of the cards have already been cut up, I intend to keep one for emergencies.

I had considered a 0% card, but I suspect they won't give me a credit limit anywhere near that! I suppose I should try anyway.

My earnings aren't likely to increase in the near future - state owned bank with a pay freeze and little chance of promotion!

stupot101

stupot101 wrote: »

There were various causes of the debt building up, all of which are in the past or have been addressed. The debt wasn't the result of overspending. Two of the cards have already been cut up, I intend to keep one for emergencies.

I had considered a 0% card, but I suspect they won't give me a credit limit anywhere near that! I suppose I should try anyway.

My earnings aren't likely to increase in the near future - state owned bank with a pay freeze and little chance of promotion!

I've been able to afford the repayments up until now, but the mortgage goes to full repayments next month so I'm trying to reduce outgoings as well.

Foxy-Stoat_3

Maybe just get as many 0% cards as you can, transfer what you can and concentrate in overpaying on the highest interest card until the 0% rate runs out, and repeat.

Can you change your lifestyle, sell stuff or down value your car to clear a some debt?

I would put all the cards on a spreadsheet and work our how long it could take you to clear them, make monthly budgets and try and save where you can.

If your bank will give you a good rate on the loan, and you cut up the cards, maybe leave one for emergency but reduce the limit to £250 it may work out better for you.