Loan for debt consolidation - what am I doing wrong?

Reidles

Hi all,

Ok, so I need a little bit of advice, as my current situation is ludricrous.

I have around £15k of debt, spread across credit cards, HP car and other credit agreements. As it stands I fork out around £500/month on this debt through minimum payments.

If I was to take a loan out to clear all of this, at 5% it would only equate to £300/month, with the added incentive of being debt free in 5 years.

I've dipped my toes in online searches, but the elegibility calculator always retruns a 0% chance of being accepted with anyone. I've not got a great credit score; but I imagine that's mainly to to with borrowing more and not really paying exisiting debts off (hence why I got in this mess). I've not had creditors chasing me with any frequency. At times I have had to cancel a DD and pay it a few days later, due paydays not linking up, but by and large I always keep my repayments up.

Anyway, I was going to go into my bank and sit down with my spreadsheet (which I have been using for years) and all my sums in order. If they were to accept, not only would by monthly payments be reduced by 40%, they would pocket £2k from the loan and I'd be debt free in 5 years.

To me, this is a no brainer - I'm in a steady job, earning decent money in a generally safe industry, but why wouldn't they say 'yes'? Any tips would be very much appriciated!

[Deleted User]

They won't say yes unless they can be sure you'll pay off the existing loans, which many people don't.

You also probably don't earn enough to support 30k of loans. Plus, with a history of missing payments, you're not going to get a loan of anything less than a 50% APR, if that.

Visit the DFW board for tips on cutting costs and clearing the debts faster. Some small changes can make some big differences.

HappyMJ

Reidles wrote: »

Hi all,

Ok, so I need a little bit of advice, as my current situation is ludricrous.

I have around £15k of debt, spread across credit cards, HP car and other credit agreements. As it stands I fork out around £500/month on this debt through minimum payments.

If I was to take a loan out to clear all of this, at 5% it would only equate to £300/month, with the added incentive of being debt free in 5 years.

I've dipped my toes in online searches, but the elegibility calculator always retruns a 0% chance of being accepted with anyone. I've not got a great credit score; but I imagine that's mainly to to with borrowing more and not really paying exisiting debts off (hence why I got in this mess). I've not had creditors chasing me with any frequency. At times I have had to cancel a DD and pay it a few days later, due paydays not linking up, but by and large I always keep my repayments up.

Anyway, I was going to go into my bank and sit down with my spreadsheet (which I have been using for years) and all my sums in order. If they were to accept, not only would by monthly payments be reduced by 40%, they would pocket £2k from the loan and I'd be debt free in 5 years.

To me, this is a no brainer - I'm in a steady job, earning decent money in a generally safe industry, but why wouldn't they say 'yes'? Any tips would be very much appriciated!

Sometimes it gets to a point when the banks just say enough is enough no more credit.

You could use a 0% on purchases credit card to buy the groceries with (and anything else that doesn't charge a fee to put on credit card) and use the money that you would have otherwise spent on the groceries to pay the debt charging the most interest which will reduce the overall interest charged.

Reidles

That was my fear; that they would consider the loan to be 'more credit', which I suppose it is.

It's so frustrating, I just need a better APR. I have no intention of using the loan for anything other than clearing off the existing debt so it's not really any other debt.

My Dad suggested going to his bank, using him a co-applicant (they have his pension, so the secutiry would be there).

imran_north

Is there any ideas out there on how I can clear a loan as fast as possible? a second income would be ideal.... the above posts are just scary

[Deleted User]

You need to break down your debts and figure out what you owe, to who, at what rate and which ones you can overpay. Then make some small adjustments to attack the most expensive debt first.

I would be wary of applying for a joint loan, as you will impact their credit file negatively through association.

bengal-stripe

Reidles wrote: »

To me, this is a no brainer - I'm in a steady job, earning decent money in a generally safe industry, but why wouldn't they say 'yes'? Any tips would be very much appriciated!

Despite you earning "decent money", you have managed to accumulate a debt of 15k in a certain number years. You have lived beyond your means, where is the evidence that you have changed your ways?

The bank will have to presume you continue that way. Even if you get a loan and clear your other debts, you might just as well run them up again and in a year or two your debt is twice the size it is today.

You must be able to demonstrate you have turned over a new leaf (not through words, but through figures). Get your debt down by your own efforts over the next couple of years, then apply for a loan (and it won't be as low as 5%).

andyfromotley

bengal-stripe wrote: »

The bank will have to presume you continue that way. Even if you get a loan and clear your other debts, you might just as well run them up again and in a year or two your debt is twice the size it is today.

This, ime experience is exactly what many people do (including myself. On the DFW board where most of us end up it is all too common to see a couple of big consolidation loans on peoples SOA's which were intended to clear it up once and for all. This inevitably sits alongside huge CC debts that were run up again once the loan has cleared the cards.

You are focussing on the symptoms not the cause. The cause is that you are living beyond your means. You must address this or no matter what else you do you will end up with more and more debt. For the reasons stated above consolidation is unlikely to help you at this time, it may help when you have resolved the underlying problem. It also appears that this is not an option for you at the moment due to your poor credit history.

You can sort this out, come and join us on the DFW board for advice, inspiration and even a shoulder to cry on every now and then!

thorsoak

Have you considered "snowballing" your debts? Here is a link which might be of help to you - it was to one of my young relatives :- http://www.whatsthecost.com/snowball.aspx

Reidles

Thanks for all the advice. I guess what I'm try to ascertain is whether its worth actually going to my bank to discuss.

Paying off some higher rate debts isn't really an option. You *could* argue that I'm doing that already: By the start of 2017 two of my debts will be paid off - resulting in bringing down my existing balance/monthly payments to £13k/£310 (they are large monthly payments as I wanted to clear them quickly when I took them out).

By the time that comes around, yes, I could still try and look at a better rate of loan to clear the remaining £13k, but the real issue is the 'hand-to-mouth' situtaion I'm in right now. Obviously still very much an option, but that's 18 months away. By that point, my monthly repayments would be the equivalent of a reasonable 10% loan over 5 years without doing anything. There'd be no real saving to me (vs current payment plans) if I sourced a loan then, and only the incentive of being debt free in 5 years remains (not that it is to be underrated).

andyfromotley

I think you are on a complete non starter with getting a further loan. You can go to your bank and try but i think your credit history is absolutely shot.

You sound as if you have a high Credit to income level, affordability issues, missed payments and some collection activity. This will all add up to 'computer says no' And to be fair i suspect thats right, would you lend someone with your history money?

You could go down the route of a guarantor loan using your dad. This is an idea that i hate as it transfers your risk and debt to him. What if you die? Fall ill and can't work? Go to prison? Keep spending and can't repay? All of these scenarios end up with your dad paying the debt. This happens a lot and we see desperate guarantors posting on these forums looking for a way out of these deals (there isn't one, they have to pay). If you insist on doing something like this then it makes more sense for your dad to get the loan on his own as the rate is likely to be much better and the risk remains the same. (i still hate this idea though).