Consolidation Loans Can Work

ronny147

July 2014 = 31k of debt - 7 credit cards - high interest on all 7 - would have only paid off a tiny amount and would still owe well into the 20's if we had stuck with credit cards.

Took out a consolidation loan and this is now down to 3k left with monthly payments of 871 (the same as the min payments for 7 credit cards.

Will be debt free in June. But had we stuck with 7 credit cards the interest was so much higher than one loan. So why do people seem to be so anti this option - just wondering, as it can work...

MrsTinks

ronny147 wrote: »

July 2014 = 31k of debt - 7 credit cards - high interest on all 7 - would have only paid off a tiny amount and would still owe well into the 20's if we had stuck with credit cards.

Took out a consolidation loan and this is now down to 3k left with monthly payments of 871 (the same as the min payments for 7 credit cards.

Will be debt free in June. But had we stuck with 7 credit cards the interest was so much higher than one loan. So why do people seem to be so anti this option - just wondering, as it can work...

Because whilst it CAN work then it very rarely does... We don't generally advocate it because unless you address the issues that led to the debt then all that will happen is that those debts run up again. And not many would be able to get a consolidation loan to that amount, especially with still having full access to the credit cards which are sooo easy to then run more debt up on.

Look at these boards and see how many of us consolidating DIDN'T work for... congrats on being one of the few that it did We don't have a problem with those it worked for, but please respect that it's a minority If someone can be totally disciplined (and can get the loan in the first place) then yes it's a good option. Although 0% transfers would have been better

oldhand

As above,you were one of the very lucky few and I am pleased it worked for you,however borrowing more money to pay off already borrowed money rarely works out.Those thousands in your account which you said to yourself was only to pay off the high interest CCs has a nasty habit of finding a new home elsewhere but "only for a little while".
That little while grows as other bills (many of which you may have been unaware) come calling and also eat into the new loan.Glad your off to a good start in new year.....

enthusiasticsaver

Do you still have credit cards? The reason consolidation loans rarely work is that it doesn't lead to changed spending habits. What led you to take out 7 credit cards in the first place and have you now learnt to budget? Well done on being almost debt free though

ronny147

We were going to pay less interest on the loan than if we kept the cc's even if we put a couple on 0%.

We took the loan out and closed the 7 credit cards. So went from 7 credit cards where effectively we were only paying off a couple of hundred off the debt to one where we had a committed 871 in 36 monthly payments.

Dont know why people think that taking a loan out to pay off debts is necessarily bad, especially when you dont intend to rack up any more cc debt....

MrsTinks

ronny147 wrote: »

Dont know why people think that taking a loan out to pay off debts is necessarily bad, especially when you dont intend to rack up any more cc debt....

Because... not everyone has your will power.

Is consolidating bad? No.

Is it suitable for people with bad money management? Usually

Can it work? of course!

The harsh trust is we have thousands of people on here who it did NOT work for. We're working on experience of being round here in some cases WAY too long *cough* and not just basing it on personal experience.

You had the discipline to use consolidation properly - well done, seriously! But you are a minority on this board unfortunately.

feeling-good

less than 2 months ago you put in here you had to put £5,000 on a credit card.
Have just had an emergency and had to spend on my cc which is 5k now. ( only debt)

How much of a problem would this be to a lender. Do people apply for mortgages with cc debt often?

We earn 100k between us as a joint income and manage the debt down by paying 500 off a month

ronny147

871 x 36 = 31k. So, on a 25k loan 6k interest but in total all the credit cards were higher in interest.

Closed 7 - took out a lower interest loan on 1 new cc to cover the 6k above 25k (31k total debt)

Will be debt free in May (including cc)

[Deleted User]

We done it twice now and are back in debt again. Short term it's a good idea, long term didn't work for us.

debtfreeme2015

Unfortunately it didn't work for me. Hence the mess I'm in now. Determined to beat it this time though

TwinMummy

Didn't work for us either. Took a loan to pay off the cc's and now we have loan plus cc debt. Have learned that for us loan consolidation is not the way to go, so have now applied for balance transfer card.
Well done to you for having the willpower to stick at it and do it right. It must feel amazing to be very nearly debt free.