Consolidation Loans Can Work

lazer-zxr

I appreciate what you are saying. I just don't think you should be taking the blanket approach if saying stay away from consolidation ..... when for some .... albeit that might be the minority .... it may be that consolidating is the best decision. If I hadn't consolidated .... I wouldon't be worse off than I am now. I know it's a free speech forum ..... and you can advise whatever you want .... I just personally don't think it's good advice when consolidation might be the best option, but someone has been discouraged from doing it due to a blanket statement on here. Just my opinion.

And Mrs. Tinks and Sourcrates.... I respect your advice and knowledge enormously .... for the contribution you make to this forum and the advice I have used from yourselves to help me get this debt down.

MrsTinks

I think if someone came on here with the right circumstances then we probably WOULD support consolidation, but it would take a lot to convince us that they were as committed to chopping up all the cards and not accept any new debts whilst getting debt free.

Like when I actually managed to appeal a loan rejection for a car based on my knowledge not only of my SOA (we're talking to the penny...) and the ins and outs of debts, the risks and the consequences. Yes I managed to get a loan and it was to buy a car I needed and it was the right loan. Likewise if someone came on here and it was by far the right choice then I would potentially support it. Potentially

January2015

I think 'most' people who have reached the point of searching for a forum to provide advice and support with debt problems will have either already consolidated and re-built more debt (mmmm....yes that was me...and more than once!), or have reached the point where they are maxed out on credit and the best loans they could get are not at good interest rates anyway.

I also think the experienced posters on this forum can eek out the information from new posters on how debt was accrued and any advice given is built on that knowledge.

I think it is always advised on here never to consider consolidating unsecured debt into secured debt. It's important to distinguish between an unsecured consolidation loan and a secured consolidation loan.

However, it's also important to say that I have seen advice given on this forum where experienced posters feel there are occasions when it could be beneficial for unsecured debts to be consolidated into an unsecured loan, where such a loan has been offered at a preferential rate. From my reading of such threads, this advice has always been given after discussing the pro's and con's of consolidation and with the massive warning that when consolidating it's important to close any credit facilities which are cleared with the consoliation loan. It is rare though to have people coming on here who are considering consolidating and noting they have been offered unsecured loan facilities at extremely good percentage rates.

redpete

TwinMummy wrote: »

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.

Balance transfer is little different to a consolidation loan. You move the debt to a cheaper one but you still have to pay that off and gave the temptations to spend on the original card again.

ronny147

redpete wrote: »

Balance transfer is little different to a consolidation loan. You move the debt to a cheaper one but you still have to pay that off and gave the temptations to spend on the original card again.

That is why closing all the creit cards and having one debt payment on a loan is a good idea as you no longer have cc's to spend money on - thus avoiding the temptation

Chandelier.

I'm not quite sure whether my story is classed as a consolidation loan. All I had was initially car finance on a PCP deal. I was able to take out a loan with cheaper interest to cover this which effectively saved me alot of money.

However since then I have massively overpaid the loan. And just recently I've taken advantage of 0% money transfer offers and used this to my advantage to save more money. My debt may now be spread across 4 different creditors but I'm aware how much I owe to each one and when the promotional offers end.

My plan is to snowball the debts- i.e. pay the loan off first (3.3%) then tackle the 0% offers starting with the one that finishes the earliest.

I think alot of this is down to how people control their money. I've never really been one to spend on credit cards unless it's for protection purposes only. I guess what I'm saying is this worked for me but for a different reason entirely to someone with lots of different card debts who consolidate to one loan.

I have a family member who ran up large amounts of debts and kept refinancing and consolidating until he got himself in one big mess. Luckily a family member helped him out (I don't agree with this but whatever). Yet still to this day he's not brilliant at a managing his money and it would not surprise me if he has accrued further debt. He's always been a spender. He believes that he is entitled to these things and that credits the way forward. One day he may have his lightbulb moment. If it wasn't for the family member he'd be in massive trouble. The amount of stress it caused was never ending. You can't help someone who won't help themselves.

In some ways it's about using the right offers to your advantage and tackling the reasons behind the debt. Whether they were necessary and beneficial or if it was impulse spends/overspending to keep up with others.

With my family member , he consolidated into one big large chunk from family member and is paying off big chunk of his wage each month for the next 8 years. He hasn't learnt his lesson because since then he got married and used credit for some of that. He never sets up standing orders/direct debits to pay off any debts. He's quite lazy in relation to alot of it. But we can't change his ways. That's why consolidation didn't work for him. You need discipline for it to work and to tackle the reasons behind it.

This family member is the reason behind alot of my anxiety re money. Yes I cope and can afford things but I'm very careful with what I do spend. I question my decisions alot. I only get credit where necessary or advantage to me. I guess this is two different stories but you can see the difference of why it worked for me and why it didn't for someone else.

MrsTinks

So, let's be clear - BT is in the same realm as a consolidation loan. However most people who would qualify for a consolidation loan (at a reasonable rate) would also be able to get at least one half decent BT card. It's at this point it all becomes very technical and we need to look at the exact situation of the individual to see if this might be a good direction.

Assuming then that someone on DFW has great ability to get further credit (yes it happens) it would usually be the better option to use 0% cards with say a 1.5% transfer fee, BUT it will also depend on if they can then repay before the end of the 0%. If they cannot or they have more than what can be transferred it becomes MORE convoluted because then we need to look at which cards they have that may spit up deals when the card has been cleared and in effect do a round robin of debts to 0% offers and involves snowball calculators etc.

However - as a first option I still do not think we will ever suggest a BT because it is either rarely the cheapest option if the poster can actually get that kind of credit (0% cards would usually beat it) or we would completely shy away from suggesting obtaining more credit in any guise.

If anyone takes out any new credit (CC or loan) then the exact same self discipline counts because NONE of the lenders will insist on this as part of the agreement. And a consolidation loan of sub 4% is frankly like seeing Gerrard Butler in real life: I know he exists, but I can promise you the chances of me ever coming across him in real life are slim to none

MrsTinks

Chandelier - I think in my mind re-financing something is a completely different matter... That is just me though. You did not have problem debts, you are in control of your spending etc from what you say so it's not really comparable. And there will always be ONE person out there who will be able to disprove a theory

But well done on having total control of your finances!

enthusiasticsaver

ronny147 wrote: »

That is why closing all the creit cards and having one debt payment on a loan is a good idea as you no longer have cc's to spend money on - thus avoiding the temptation

I quite agree and this is obviously why it worked for you. Presumably though at some point you also adjusted your spending habits and started budgeting. That is the reason you got out of debt and getting a loan to get your debt on a lower rate helped in this. Had you consolidated before you got to £31k debt prior to this?

enthusiasticsaver

The usual debt spiral pattern goes.

A credit card is taken out and either the debtor overspends and puts money on the credit card up to the limit then takes another card out and maybe a third.

Then they think a consolidation loan will give them a lower interest rate so they repay the cards, take out the loan but carry on spending regardless until the credit cards build up again.

Fast forward a few years and instead of dealing with debt of £5-£10k the debt is £30k or £50k but at some point they need to live within their income and adjust spending. If this was done at a much lower level of debt this would be much cheaper for the debtor.

Hence the consolidation loans just delay the inevitable.

I don't know your situation of course but presumably there was a point before you had 7 maxed out credit cards when the light bulb flickered and you realised you were overspending?