To consolidate or not

lovelylass_2

Hi everyone - I'm interested in your thoughts. Currently my partner and I have debts (credit cards, loan & over drafts) of £31k. I was looking to get a joint loan for £30k over 6 years (which is cheaper than what we are paying now) to clear all the debt and have one payment. We earn £56k jointly and pay £450 rent and £89 council tax.

What's everyone's thoughts on consolidation? We need to get this sorted so that we can save to buy our first house. Btw we are in our mid 40's :sad::sad:

Yours views are very much appreciated

Xx

January2015

lovelylass wrote: »

Hi everyone - I'm interested in your thoughts. Currently my partner and I have debts (credit cards, loan & over drafts) of £31k. I was looking to get a joint loan for £30k over 6 years (which is cheaper than what we are paying now) to clear all the debt and have one payment. We earn £56k jointly and pay £450 rent and £89 council tax.

What's everyone's thoughts on consolidation? We need to get this sorted so that we can save to buy our first house. Btw we are in our mid 40's :sad::sad:

Yours views are very much appreciated

Xx

We've been there, done the consolidation thing a number of times. We cleared the debts onto a loan, then run up the credit cards again, then cleared the loan and credit cards on a secured loan. We talked ourselves into the lower rate for the loan excuse each time. Oh how I wish I had found this forum years ago.

We never learnt how to manage our money until we reached crisis point and had no choice. Well, that's not true - we had good credit ratings and had the option of consolidating yet again by remortgaging. Thank goodness we never did.

I personally would not recommend consolidating. I know others will be along who will advise you post a full SOA (statement of affairs) because the information you've provided about income and expenditure isn't enough for anyone to give you advice on. Seriously, with your joint income and such low rent/council tax you should be asking yourselves why you are not able to manage within your income and have run up the credit cards, loans and overdrafts.

chevalier

http://www.whatsthecost.com/snowball.aspx

The problem with consolidating is that you are then paying interest on interest, so the actual interest rate is much higher than consolidation interest rate if that makes sense.

You are also tying yourself into another term of debt for six years. Do you think you can maintain the budget you will have to set? Will you have the strength to shut down all the cards once you have the money or will you keep one 'just for emergencies'? And those emergencies end up including everyday spending because you have addressed the reasons you wracked up the debt in the first place. 56k is not a bad joint salary, so you need to figure out where the overspend is coming from. Otherwise you may end up back here in two or three years, with more debt than this, but less options to sort it.

Personally I would got for transferring as much of it as possible onto 0% cards and knuckle down and pay it off.
good luck
chev

[Deleted User]

From experience, the problem with consolidating is, after a couple of years you will get offered a refinance, which will reduce your monthly payment, by giving you a lower APR.

Given your budget is tight, you will fall for the "This loan will give you an extra £xx left in your account each month", and take the refinance offer.

Trouble is, by refinancing, you're resetting the loan period, to the original 5 years.

By this method (I refinanced twice :wall: ), I turned my 6 year loan term, into a 10 year one. :embarasse

fatbelly

It's a 'no'

I doubt that with 31k debt, even a 56k salary would be enough to get an unsecured loan of 30k. And as the others have said, it's a strategy with a poor track record of success.

Post a soa and let's have a look at it

http://www.stoozing.com/calculator/soa.php

MyLastFiver

As per other replies, you need to sort out the reason for your overspend first, and draw up a budget that means you're living within your means month to month. Don't underestimate this step!

Then yes, consolidate if you want, but close the credit card accounts when you pay them off.

A4445

Consolidation didn't work for me either, the loans got bigger and I spent again on my cards. I ended up loosing my job and had to go bankrupt not a nice experience. Addressing why your in dept should be the first step.

enthusiasticsaver

It is a no from me too. With your reasonably high joint salary and low rent then you have serious overspending issues to accrue debt of £31k with no assets to show for it. Do you know how the debt occurred in the first place - ie unemployment, reduced overtime or such?

Consolidating means you are opening yourself up to temptation that once the debt is moved on to a loan you then feel it is ok to once again accrue debt on to cards again. Before you know it you then have £50k of debt and get caught in debt spiral.

There are no short fixes to getting rid of debt. You need to examine your spending habits, learn about budgeting, move as many cards on to 0% interest as you can and set up a repayment plan and stop using the credit cards altogether.

First steps

Move debts to 0% if you can
Set up a spending diary to recorde all spends going forwArd
Post an soa up here and be truthful about what you can stick with.

Good luck.

enthusiasticsaver

January2015 wrote: »

We've been there, done the consolidation thing a number of times. We cleared the debts onto a loan, then run up the credit cards again, then cleared the loan and credit cards on a secured loan. We talked ourselves into the lower rate for the loan excuse each time. Oh how I wish I had found this forum years ago.

We never learnt how to manage our money until we reached crisis point and had no choice. Well, that's not true - we had good credit ratings and had the option of consolidating yet again by remortgaging. Thank goodness we never did.

I personally would not recommend consolidating. I know others will be along who will advise you post a full SOA (statement of affairs) because the information you've provided about income and expenditure isn't enough for anyone to give you advice on. Seriously, with your joint income and such low rent/council tax you should be asking yourselves why you are not able to manage within your income and have run up the credit cards, loans and overdrafts.

This!!! Please learn the lesson from someone who has been there and done that. Consolidation is not a quick fix, just a delaying tactic. In the long run you will be postponing your dream of owning your own house.

-taff

You were advised to post an SOA a few weeks ago and given a link to the snowball site.
Did you look at that or are you feeling overwhelmed with the amount you owe so you're trying for the quick fix?

Personally, consolidating didn't work for me either, I think at the worst point I owed 10.000 before I actually realised what I was doing, so I paid off the cards one by one, paid the smallest ones first because they only took a couple of months, then cut them up and closed the accounts.
Then I overpaid on the biggest ones while making minimum payments on the others and carried on like that.

I lived in my overdraft for years, had nothing to show for the overspending, I was just doing what you have, living beyond my means living the high life.

Now I have two credit cards, one for emergencies, one for abroad, and the balances are cleared every month.

I also recommend using YNAB, yes, you have to pay for it after a month free, but it does change the way you budget, from thinking I have x to spend, to thinking, I can spend x here and this is the limit of what I can spend.

Your income seems to have plenty spare to start paying your debts, so get on with the SOA and see where you're actually spending the money, and how you're spening it.

[Deleted User]

-taff wrote: »

I lived in my overdraft for years, had nothing to show for the overspending

Been there.