is it wise to consolidate debts?

cobbingstones

Hi all

My husband and I have debts of up to £27k:eek: We owe:

Alliance and Licester o/d £4,000
Marks and Spencer CC £7,000 (very low interest)
Huge loan £16,000 (low interest)
(we pay this back at £370 a month which is killing us and we have another 4 years to go)

My husband wants us to consolidate these and take out a loan with Barclays (6.7%) they add on insurance, but if this is not needed then you have the option to pay the amount of unused insurance onto the final payment (if this makes sense?)

I'm scared due to this being attached in some way to the house. But my dh states that most loans are anyway.

Could someone please be kind and give me some advice to stop my worrying?

He wants the extra money to buy a large car, so he can start his own business.

MM

davetrousers

If you are £27k in debt. You do not want to take out another loan.

Let me say that again.

YOU DO NOT WANT TO TAKE OUT ANOTHER LOAN

Lucy1982_2

Have a look at the snowball calculator: http://www.whatsthecost.com/snowball.aspx?country=uk
Put in what you are paying now and what you would be paying with the new loan. Sometimes it can suprise you as you end up paying more with the new loan. This will give you something in black and white which may help.

As a general rule consolidation is not encourage, but if you decide to do it you must be so strict so that you don't get into even more debt.

Hope that this helps. I've done it and it didn't work. good luck

steve700

Lucy1982 wrote: »

As a general rule consolidation is not encourage, but if you decide to do it you must be so strict so that you don't get into even more debt.

Hope that this helps. I've done it and it didn't work. good luck

One of the many voices of experience on here

HairyHandofDartmoor

It sounds a bit risky to me. About 80% of new businesseses fail within the first year, so you could lose your house if this happened.

Tell him that he has to wait until the other debts are paid, and why not save up the money to start the business once the debts are paid? This is what people did in the past, saved up for what they wanted, rather than took out an expensive loan.

Why have the debts been built up in the first place? If it is due to overspending or poor budgeting, then you need to solve this problem first before you borrow even more money and put your home at risk.

Why don't you put up your statement of affairs ( see southern scousers sticky at the top) and let us help you with your budget?

Dr_Hook

madsmum wrote: »

He wants the extra money to buy a large car, so he can start his own business.

Maybe it's just me, but I find that sentence really scary :shocked:

Taking out a £27k+ loan secured on your property and using some of the capital to start a business venture sounds like the top of a slippery slope to me.

Make sure you're both very sure that the business will work before you do this - you're essentially gambling with your home and could stand to lose everything.

Best of luck whatever you decide but I would definitely side with previous posters and strongly caution against getting the loan.

MrsTinks

At the moment you have unsecured debts from what I can read... you want to take this out as a secured debt... NO!!!!!!!!!
If anything goes wrong now it's UNSECURED - that means your home isn't directly at risk! If it becomes a secured debt then your home will basically be first to go. It's like pawning your home... if you can't raise the money to buy it back then you loose it...

Dig your heels in girl and don't let him do this! Get free of debt first and then re-assess!

RAS

Hi

Huge loan £16,000 (low interest)
(we pay this back at £370 a month which is killing us and we have another 4 years to go)

1. This is not consolidation. This is about increasing your debt. If you are struggling with £27,000, you cannot afford more debt.

2. Consolidation is what you have already done and you are finding it a struggle.

3. Even if you were only reconfiguring your existing debt, you would be ill-advised to transfer unsecured debt to a secure loan. You can walk away from unsecure debt or renegoitiate the payments. Secure debt will chase you even if you went bankrupt in the future.

4. Most loans are unsecured. If you can only get an secure loan, it looks like the credit companies think you are too much of a risk for unsecure loans.

5. Most small businesses fail in the first few years. Do not fund one on a loan secured on your home.

6. If the house is in your joint names, you need to refuse to sign the papers securing the loan on the house. If it is in his name only, you may not be able to stop him.

If he needs a car to set up a business, then you need to save up for a second hand one, or to get a lease agreement that you can ditch out off if things go pear shaped.

Apart from this, if you have not done so, post up your SOA so that people can help you find the money to pay off your existing debts.

cobbingstones

My heart felt thanks to you all. I shall indeed dig my heels and say 'no'!

Will post a SOA asap when I've got all the APR's etc to hand.

MM

cobbingstones

Forgot to add.......he wants to do it so we'll have one payout for all the bills and a lower payment. Is this right???


MM

rayday2

The payment could be slightly lower but the risks are a lot higher and this time you are talking about risking your home.