Consolidation Loans Can Work

Chandelier.

MrsTinks.

I completely agree. My situation is not comparable as I used offers to my advantage and I've always managed to control.

The reason I believe I've managed control is due to seeing the mess the relative got into. What started out as a loan, ended up with numerous credit cards and payday loans and unable to meet monthly payments. Consolidation loan number two happened and the pattern repeated.

You have to be really strong-willed and disciplined to stick to paying off the loan and not taking out further credit. Something which a lot of people struggle with. Sometimes it's a never ending viscous circle. It's about changing habits and managing money better. People have different ways. In some ways I believe it can work but for the right reasons. Usually I agree you see more success with people snowballing and tackling their debts one by one. They tackle the debt head on and I believe seeing the figures change and each debt paid off gives them more encouragement to continue to do so.

Dribiddi

I've been quite interested reading others opinions of debt consolidation and surprised the concencus is to avoid although I now see the logic. About 3 years ago I 'consolidated' about £6k and it spiralled.
I then consolidated about £15k of debt 18 months ago.
All the related credit cards bar one which was controlled by my partner, I had no access to it whatsoever were ripped up. My combined overdraft facilities were reduced from over £2k to £300 however I rarely use the facility. I sold by 12 plate Astra for a 11 plate Suzuki Alto (much cheaper to run and £2k towards debt reduction.) I live off an allowance of £100 per week for food and fuel and am beginning to feel I am getting somewhere. I save a mimmum of £500 per month for mortgage deposit off a £26k salary.
I suppose the lesson is in my opinion debt management and reduction is a lot to do with your mentality and willingness to embrace your reality and do something about it.

zippygeorgeandben

I couldn't agree more Dribiddi.
In December I was on here asking for advice on debt consolidation. I wanted to borrow more money, even though debt repayments would be the same. After many insightful posts by lovely MSE members, I realised that I was just making my life of debt last longer when instead I should be paying off as much as I can to become debt free.
It's fantastic that you are saving at least £500 a month for a mortgage deposit. That for me is a long long way off at the moment but eventually, once debts are paid off, it could be a possibility down the line.
Keep it up and perhaps create a signature for yourself showing how much you are saving

ReadingTim

Mathematically, consolidation loans can work, however, they require iron financial discipline and organisation. Unfortunately, if the borrower posessed that sort of discipline and organisation, then they probably wouldn't be in debt in the first place...

Seriously, it's like a junkie claiming that one last fix is going to cure them of their addiction.

I'm pleased they have worked for some. But they're the exceptions, rather than the rule.

bertiewhite

A consolidation loan has seemed to work for me (Tesco Clubcard, 3.3%) - I say seems to, because I'm only a year into the loan but I have an earlier end payment date with regular & lower, fixed payments as opposed to a longer repayment plan with higher repayments.

Yes, I have had to change my spending habits but the extra "disposable" income I now have as a result combined with the fact that the cc debt was a legacy debt from a few years ago means that I am now in a position to actually save some money each month meaning I can now live fairly comfortably within my means and not have to emergency spend on cards.

Lau0707

Hi all,

So far for us, our consolidation loan has worked. We free'd up £560 a month for one payment of £154 a month for 4 years. We were paying £120 a month alone to my overdraft fee's, so we applied for a loan from our bank for 5k and cleared the overdraft too. I rang up and also asked if they could remove this months fee's as i had closed it and had no intention to open it, they then refunded me £120

our repayment is £8k, but we have been making more payments online which reduces our term.

When we rang up the credit cards, we also had them shut down there and then. We have realised a lot of it is our spending habits, and we have analysed the past 4 years to a T, as 2 years are good, and 2 years aren't. Its like a 1 year cycle for us. But having actually see where we go wrong is good! Having a look at your CC statement is an eye opener, I sat there saying 'why did I get that?'

Im hoping it continue to works for us, but the interest and APR we were paying on some things was insane!! All ways I try to find to make extra cash, simply goes straight to extra loan repayments. We are desperate for a mortgage, and whilst we have now been given AIP's, and our credit ratings have gone up a lot from the past 5 years where we had 6 defaults between us, i refuse to get a house with this loan over my head! Good luck to everyone who is trying not to fall back in the trap. So glad I finally joined this forum after lurking for 3 years. Keeps me so motivated daily, and i love the challenges. x

Lau0707

P.s, I'm not proud of the situations we got into so young, i was 19, at university in my last year, with a 1 year old, and a baby on the way. Its been a struggle, but seeing how far we have come is amazing. We cleared 15k on our own first, before we got a 5k loan.
Some may say why didn't you sort the 5k and not apply for the loan, but we couldn't live, the interest rates were ridiculous. I was scared my husband would lose his job, and I would rather have to find £154 a month, than £560 x

BLOW_FLY

I probably am one of the lucky ones too where a consolidation loan has worked.

Back in 2012 I had 5 cc and overdraft of roughly £5k, 7yr consolidation loan taken out for just under £25k. Closed all but one of the cc accounts which I use for work and reduced OD limit to £500.

Consolidating for me reduced my payments and actually went some way to eating into the debt. I did have to change lifestyle and spending as the debt had been accrued via frivolous spending.

Of the loan there is £6800 left to pay and £1500 on cc which £1000 of that is company expenses.

Reading posts on here I fully understand how this sort of thing doesn't work because when I first consolidated they put the loan amount in my account with no restrictions on what I could spend it on.

So all of a sudden I was rich.....!

Fortunately sense prevailed and I cleared and closed all CC accounts and used the loan for what it was intended.

BF