Debt Consolidation Loan - Credit Card Pay Off

aggie01

Hi all,

This year my resolution was to focus on not splurging, cutting down costs on non-essentials, and paying off debts.

I have managed quite successfully, with only one debtor left, which is proving particularly difficult.

I have an active credit card with the value of £3000, of which my available balance is roughly £300. My monthly payment is a minimum of £170 currently. I looked in to the option of a "Consolidation Loan", which would provide the debtor directly with the full balance to pay it off, provide myself with a lower monthly payment (of £140) and ensure I will be debt free in 3 years. However, when I applied for this I was rejected with no reasoning.

I can't understand this for a few reasons: I have recently changed jobs to a considerable pay rise meaning I have more expendable income than initially expected. Secondly, if I am currently able to afford the payment of £170 per month, how could I be "at risk" of not being able to afford a reduced monthly payment of £140 to the new lender?

I have attempted twice to apply for such a loan, and I worry this has actually negatively impacted my credit rating further.

Can anyone suggest any other ideas or give me any advice?

I would be very interested to hear from you.

Thanks

Aggie01

fatrab

What is your interest rate on your credit card? If you're paying interest then a 0% balance transfer card would be a much better option than a consolidation loan.


Look for cards which have eligibility checkers so as not to damage your credit file with too many applications.
https://www.moneysavingexpert.com/eligibility/credit-cards/

£140/month for 3 years is a whopping £5040. For £3000 debt that is an eyewatering amount of interest.

fatrab

If you are successful in obtaining a balance transfer card, set the monthly payment so that the balance is cleared by the end of the 0% period and cut the card up.


Best wishes

[Deleted User]

Most people are rejected for consolidation loans due to affordability - ie you can't afford both the existing and the new debt. You need the second before you can pay off the first.

Pay down some of the debt. When your situation improves, you could try a further application.

katie4

can I suggest you try to apply with your local credit union if you have one? I couldn't get a loan anywhere but my local credit union were brilliant and I now have consolidated my cc into cheaper monthly payments and I cut the cc up straight away, such a relief to have it all sorted

enthusiasticsaver

Consolidating debt is never to be advised anyway. As others have said whoever you applied to looked at what debt you already hold and consider you cannot afford the loan and the credit card. There is nothing to stop you building the debt back up on the credit card once you cleared it so you could end up in a much worse position and most people who consolidate do just that.

The way to sort out your debt is to look at all income and outgoings, cut back wherever possible. If you have recently had a payrise this will help. Is there a reason why this particular debt is proving so difficult to clear when you have cleared others? Is it larger or older than the others or have you slowed down on debt repayment as you figure you are almost clear?

I would normally suggest try to get a 0% balance transfer but the 2 loan rejections will have affected your credit history. What interest rate are you paying and have you phoned to ask if they can reduce it?