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Unsure whether to consolidate - please advise

edited 30 November -1 at 1:00AM in Loans
238 replies 101.7K views
zippygeorgeandbenzippygeorgeandben Forumite
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edited 30 November -1 at 1:00AM in Loans
Hello everyone,
First of all, I can't believe I still remembered my username and password. It's quite a while since I've logged into MSE!
Anyway, here are the facts.
I currently have three debts I am paying off
1) £5727.54 loan(started at £11k)with Zopa @ 4.8% - I pay £230pm
2) £7568.74 loan(started at £12k in 07/2014)with Tesco @ 4% - I pay £222.61pm
3) £4211.19 credit card with Virgin Money @ 0% until June 2017 - I pay £200pm (which is more than the £50pm they ask for)
Total debt equals £17,507.47.
Total monthly payments are £653pm

I wish to reduce my monthly direct debit outgoings to give me more flexibility for stuff I want to buy.
After having a brief search, Sainsbury's have a loan for £18k (so this covers all the debts written above) @3.1% which would mean me paying £323.89pm.
TSB have a loan for £18k @3.5% which is £328pm. I'd be paying £1621 in interest for this deal.
Both these loan repayments per month are roughly £330 less than I currently pay off per month at the moment (which as I've said above, are £653pm)

I can't seem to find the wood for the trees here. What would you do?
Would you just continue to pay the three original debts off? I can afford these repayments (just) but it doesn't give me lots of flexibility.
Or would you consolidate all three debts, pay them off, and take out a new 5 year loan where the monthly payments would be reduced by over £300?
Or is there another option I should consider?
Thanks for reading,
Ben
Savings as of May 2020
Savings account 1 - £14063.93(12048.33)Savings account 2 - £4000.00(3500.00)
Current account - £3136.31(3905.05)
Total - £21200.24 (19453.38)
Plus £840 (£120 per month between CS/BS) HTB £400
«13456724

Replies

  • jonesMUFCforeverjonesMUFCforever Forumite
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    The first thing I would be asking myself would be ..............with that level of debt will I find another lender willing to lend me money at any rate never mind at 3.1%??
    It might well work out for you but you will have to be disciplined for the next 5 years - can you honestly say that this will be the case?
    What goes around - comes around
    give lots and you will always receive lots
  • zippygeorgeandbenzippygeorgeandben Forumite
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    THanks for the quick reply jonesMUFC (good luck tomorrow!) - my credit score is in the 'excellent' bracket. I've never defalted. Doing a soft credit search on the MSE site rates me at 90% to be accepted. I don't forsee any changes in circumstances, certainly for the next year. In a stable job and the landlord as just kept the rent at the same level for the next 12 months. Perhaps I should stay paying what I am for the next 6 months at least to reduce the debt even more. Just worked out that in 26 months this will all be paid off so maybe that should be the goal? Especially with the virgin card being 0%?
    Ben
    Savings as of May 2020
    Savings account 1 - £14063.93(12048.33)Savings account 2 - £4000.00(3500.00)
    Current account - £3136.31(3905.05)
    Total - £21200.24 (19453.38)
    Plus £840 (£120 per month between CS/BS) HTB £400
  • DCFC79DCFC79 Forumite
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    Your credit score albeit axcellent doesnt mean anything when it comes to lenders since they dont see it, they see the history.

    Your reports with the other 2 agencies will show you a different score anyway.
  • edited 4 December 2016 at 12:42AM
    YorkshireBoyYorkshireBoy Forumite
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    edited 4 December 2016 at 12:42AM
    I wish to reduce my monthly direct debit outgoings to give me more flexibility for stuff I want to buy.

    What would you do?
    Seems you're turning a 5 year debt repayment plan into a 7.5 year debt repayment plan so you can satisfy your "wants". I'd be concentrating on "needs" personally, and tightening my belt.

    But you say you want to free up some cash monthly, so why are you overpaying Virgin? That's £150 a month right there...isn't it?

    You don't say what your income is, but if it would support a loan it might support an MBNA money transfer card...and allow you to get some/all of the loans onto 0% interest for over 3 years for a small fee. Might be a better option?
  • ratraceratrace Forumite
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    Mate there is no way around it, you can shift it all you like but you are still not paying it off quicker all you are doing is delaying paying it off. its only 24 months mate knuckle down get it paid as fast as possible, then start saving for a house deposit so you can buy your own place and pay your own mortgage instead of someone else's

    Sorry to sound so blunt mate but there is no way out accept paying it off

    All the best
    People are caught up in an egotistic artificial rat race to display a false image to society. We want the biggest house, fanciest car, and we don't mind paying the sky high mortgage to put up that show. We sacrifice our biggest assets our health and time, We feel happy when we see people look up to us and see how successful we are”

    Rat Race
  • edited 4 December 2016 at 3:09PM
    SuperscroogeSuperscrooge Forumite
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    edited 4 December 2016 at 3:09PM
    This link helps explain why debt consolidation is often not a good idea. True, you might be able to reduce your monthly payments. But by extending the loan period, you actually end up paying MORE interest, not less.

    http://www.daveramsey.com/blog/debt-consolidation-truth

    Debt consolidation seems appealing because there is a lower interest rate on some of the debt and a lower payment. However, in almost every case we review, we find that the lower payment exists not because the rate is actually lower but because the term is extended. If you stay in debt longer, you get a lower payment, but if you stay in debt longer, you pay the lender more, which is why they are in the debt consolidation business.
  • zippygeorgeandbenzippygeorgeandben Forumite
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    Hello everyone again (OP here) - thanks to all of you for taking the time to respond to me. Everyone gave me food for thought and I appreciate it.
    @ratrace - yes I think you are right. Knuckle down and keep reducing the debt.
    @yorkshireBoy - I see your point. I'm paying £200 instead of the £50pm for Virgin. The reason for that is because since September I've been doing to 50% 20% 30% money budget planner. I won't go into details here about the planner (will bore people I'm sure) but paying £200 a month to my virginCC meant that I was paying 50% towards all my 'needs' (monthly DDs)
    Thanks once again everyone and thanks @superscrooge for the link.
    Ben
    Savings as of May 2020
    Savings account 1 - £14063.93(12048.33)Savings account 2 - £4000.00(3500.00)
    Current account - £3136.31(3905.05)
    Total - £21200.24 (19453.38)
    Plus £840 (£120 per month between CS/BS) HTB £400
  • DobbibillDobbibill Forumite, Board Guide
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    Just a little more food for thought OP.

    In June, roughly 6 months time, you will have a balance of approx £3k that is going to start incurring interest.

    The loan rates you have are reasonable, hang off with the consolidation and in May/June time, look at applying for a 0% card to move your VM balance when the interest kicks in.
    I'm a Board Guide on the Energy, Student Money Saving, UK Armed Forces and
    Local Money Saving - Wales boards. I'm a volunteer to help the boards run smoothly, and I can move and merge posts there.
    Board guides are not moderators and don't read every post. If you spot an abusive or illegal post then please report it to [email protected]. Any views are mine and not the official line of MoneySavingExpert.com.

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  • MrsTinksMrsTinks Forumite
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    Also with 90% of people similar to you get accepted... 10 in a 100 do NOT :) It's never guaranteed even with the MSE checker, or any other checker.

    Your best bet really is to review why you want to free money up. Yes paying debt off is dull and boring and rubbish. But your target is to have ALL of that money spare so you can save some and spend some - without paying someone else lots of money on top.

    Think about it - next time you want to buy something look at the price - is it still good value if you add 30% on top of the price? Because that's likely to be the cost at least on top to you until you are debt free. Is it still such a fabulous thing you NEED to have right now :)
    DFW Nerd #025
    DFW no more! Officially debt free 2017 - now joining the MFW's! :)

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  • ReadingTimReadingTim Forumite
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    I wish to reduce my monthly direct debit outgoings to give me more flexibility for stuff I want to buy.

    Stuff you want to buy, but can't afford. Mate, you're living beyond your means - you're spending, or have spent, more than you earn. If your finances are a ship, you're taking on more water than you're bailing out, and eventually the ship sinks, and you drown.

    You don't need a consolidation loan, you need a wake up call - get over to the debtfree wannabe forum and sort yourself out.
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