Consolidating Debt

Lauraeliz

Hi I was hoping someone could offer some advice.

I currently have a large overdraft and 2 credit cards for around £4000 each.

I am paying the minimum on the cards each month on the cards but I'm not getting anywhere with repaying them and im also being charged on my overdraft.

My bank (Natwest) have offered for me to consolidate it all and get a loan and pay it off each month so that I can get debt free. I am unsure if this is the best way to do it and was looking for some advice.

Can anyone help?

Thanks so much

Laura x

B0B

Consolidation isn't being debt free.


It can help, but in the long term can back fire.

Tixy

What are the APRs on the credit card? What fees/interest are you paying on the overdraft?

What is the APR of the loan they have offered you?

Before you consider refinancing I would work out a detailed budget / statement of affairs to see how much you can afford to service your debt a month. If you don't you could end up with loan repayments you cannot afford, particularly if you are currently only able to make minimum repayments and are not reducing your overdraft month on month.

rockm87

Using debt to pay off debt isnt a good idea.

Take stock of what your current situation. Great a budget and see where you can trim off some outgoings, and put it towards your debt.

You can use a snowball calculator to see the best way to pay everything off, and by when!

Puzzcat

Do not consolidate. Unless you cut up the cc's and close the accounts. Lovely Natwest were my bank for 20 years...consolidated 15k in 2008, ran up cc again.... in a dmp now, my debt with them was then over 20k that was nearly 6 years after consolidating...total debt over all my creditors was 60k.
Do not consolidate....
Learn how to live on less or increase income, budgeting is the way to go not borrowing.

January2015

Totally agree with Puzz - been there, consolidated, got the secured consolidation loan, unsecured debts mounted again and now I am in a worse state than even (see my signature ).

You might not need a DMP like me, but dealing with the debt and budgeting is the answer IMHO.

rising_from_the_ashes

Another who consolidated debts into a loan (twice) and ended up in more debt (both times)

It only works if you've sorted out the reasons for the debts (I hadn't) and can actually afford the repayments and all your other commitments (I couldn't)

Pop up a SOA and lets see if there are savings to let you clear them

FireWyrm

Consolidation loans are rarely the quick fix they are purported to be. Banks have a vested interest in keeping you in debt, hence all the juicy 0% deals on credit cards which are incredibly lucrative for the bank. They know that human nature being what it is, the average customer will consolidate debts and then promptly, feeling flush again, just go out and run up the cards all over again ending up in a worse position than they already were. This is the debt merry-go-round which most of us have been on many times. The truth is that there is no quick fix, the answer is merely to increase income or decrease outgoings, preferably both at once.

If an increase in income is not possible, then you have no other choice but to decrease outgoings and a proper budget will show you the way. I dont just mean figures on the back of an envelope, I mean a real budget which you stick to religiously. I am guessing that there is much more available in your budget than you think there is - it is usually so. There was once a time when I could not 'live' on my salary until I did a budget and plugged the leaks, whereupon I found another £1000 a month I was simply wasting here and there.

Dont kid yourself that there is a quick fix, there isnt. Debt freedom is a long hard heartbreaking slog and there is no other way around it. Consolidation loans rarely if ever work. We see it day in day out on this forum. Most of us have been there and done that.

ReadingTim

Can you trust yourself to either cut up and close both credit card accounts (or cut up and close on, and reduce the credit limit on the other to a relatively low amount such as £500 - £1,000)?

Can you trust yourself to live within your means, ie plan a budget and stick to it?

If not, in the long run consolidation will make your debt problems worse not better.

andyfromotley

Hi Laura,

I'm a newbie so no expert.

i agree with the other posters about consolidation loans, in general they are a bad thing. We are in debt because WE DO NOT LIVE WITHIN OUR MEANS. a consolidation loan will not change this. Budgeting and completely changing our relationship with money is the way forward.

It sounds like you have a decent credit history so may well qualify for a 0% credit card. This will help enormously with your debt repayment. (Close the cleared accounts though, immediately) This is slightly different in that you have replaced expensive debt with cheap debt.

But no matter what you do unless you address the basic problem of living beyond your means nothing will resolve this problem ....... ever. Please post an SOA. it will give the more experienced members a really good insight into the best way forward for you.

Spuddy27

I consolidated all my debts a number of years back, I had a very small amount of debt then, about £1000. Then I racked it up to £10,000 so I consolidated again. Now I owe about £22,000.

Do not consolidate. Unless you're getting a way better APR and you cut up those credit cards and close the accounts right away I wouldn't do it. I'm in a right mess now because of it. If i've kept chipping away at my debts as they were they'd be gone now.

Lx