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Consolidation?

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Hi guys, recently my debts have really been boterhing me greatly. Not a huge amount £3500!! But enough to keep me awake some times. I’ve been considering concolidsting into a loan so that everything’s in the one place and I can just clear it within 2 years.

Myself and my partner are also planning on a mortgage within the next 2 years as well. Will this loan mess up my chances of being accepted for the mortgage?

Any help would be appreciated. Cheers
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Comments

  • DCFC79
    DCFC79 Posts: 40,641 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    edited 28 May 2018 at 2:05PM
    Hi guys, recently my debts have really been boterhing me greatly. Not a huge amount £3500!! But enough to keep me awake some times. I!!!8217;ve been considering concolidsting into a loan so that everything!!!8217;s in the one place and I can just clear it within 2 years.

    Myself and my partner are also planning on a mortgage within the next 2 years as well. Will this loan mess up my chances of being accepted for the mortgage?

    Any help would be appreciated. Cheers

    Maybe you should post on the debt free board which is 1 below the Loans forum.

    Consolidation will only work if your both able to not increase the debt, not stick to the budget. Are you both on board with the consolidation idea ?

    Lenders will see the loan as extra debt irrespective of your idea.
    If any credit cards cut them up now.

    What does the debt consist of ?
    Look at your spending and reduce it.
    If you were to take out a loan and pay the debts off, what would happen with the payments if you or your partner were to not be able to work, due to say an injury ?


    Maybe have a read here, must have missed it as its right at the top of the forum

    https://forums.moneysavingexpert.com/discussion/5567669/unsure-whether-to-consolidate-please-advise
  • enthusiasticsaver
    enthusiasticsaver Posts: 16,054 Ambassador
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    Consolidation rarely works in clearing debt. Are the debts on credit cards and are they on 0% deals firstly?

    Have you worked out how much you can afford to repay each month? There is no advantage in having the debt all in one place. The usual result from consolidation as you will see from numerous diaries on here is that the debts are consolidated then people spend on the credit cards again so they then have a loan and credit cards making the situation much worse. You also need to change your spending habits.

    If your credit record is still ok and luckily your debt is relatively low you should be able to move the £3500 to 0% balance transfer cards so you don't pay interest. If you can get 24 month deals with a nil or low transfer fee you can clear it within the 2 year period by paying £146 per month and 0 interest. A loan will be more expensive than that.
    I’m a Forum Ambassador and I support the Forum Team on the Debt free Wannabe, Budgeting and Banking and Savings and Investment boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.

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  • 0Credit
    0Credit Posts: 52 Forumite
    Cut down on something elsewhere, pay a bit more off than you currently do each month (even if just 5%).

    Then think of balance transfers, 0% cards and checking your interest vs what a loan interest would be.
  • ReadingTim
    ReadingTim Posts: 4,084 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    Your debts are bothering you, so you think you can solve them by getting a loan. You do know that a loan is a debt don't you?!? So it can't be both the cause of, and solution to, your problems.

    Spend less than you earn and chuck the remainder at clearing down the debts, the most expensive one (highest APR) first. You can't borrow your way out of debt.
  • katie4
    katie4 Posts: 459 Forumite
    Part of the Furniture 100 Posts Name Dropper I've been Money Tipped!
    I have found most people on here will tell you don't do it
    but I did and I worked really well for us we had a high interest credit card £4500 and I was struggling to pay the minimum plus the interest on top
    I opted for a consolidation loan with my local credit union (have you got one? theyre really helpful and fantastic rates)
    we are now paying this off over 3 years and at a much more affordable rate, just make sure once you've paid it off you cancel the card so you're not tempted to use it and create extra debt
  • yoshiyella
    yoshiyella Posts: 610 Forumite
    Part of the Furniture 100 Posts
    Just to counteract this - my brother took out a consolidation loan. He got, to be fair, a really good deal.



    Pity he then racked up the same debt all over again on the cards.
  • foxy-stoat
    foxy-stoat Posts: 6,879 Forumite
    Eighth Anniversary 1,000 Posts Name Dropper
    List out the debts and the interest rates - you COULD get a money transfer credit card and get a better interest rate but you need to overpay it so its clear in 24 months.
  • DCFC79
    DCFC79 Posts: 40,641 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    katie4 wrote: »
    I have found most people on here will tell you don't do it
    but I did and I worked really well for us we had a high interest credit card £4500 and I was struggling to pay the minimum plus the interest on top
    I opted for a consolidation loan with my local credit union (have you got one? theyre really helpful and fantastic rates)
    we are now paying this off over 3 years and at a much more affordable rate, just make sure once you've paid it off you cancel the card so you're not tempted to use it and create extra debt

    Had you already been saving with them ?
    I was under the impression you had to be saving with them to take out a loan.
  • Dobbibill
    Dobbibill Posts: 4,191 Ambassador
    Part of the Furniture 1,000 Posts Mortgage-free Glee! Name Dropper
    edited 30 May 2018 at 6:20AM
    Hi MarkyMillar - welcome to the forum.

    Your debt needs to be cleared rather than moved.

    Unless you are moving it to a cheaper rate then it's counterproductive.

    You also need to address the reason you have the debt and the likelihood of that reason arising again. If so, what would be your plan to refrain from getting into more debt.

    Where is your debt? (CCs, loans, store cards, catalogues)
    What APRs are your debts?
    Paying them to different creditors is no difference to having them all in one place.

    The disadvantage of it being in one place is you have one rate - having them in different places allows you to overpay the bit that has the highest rate first then recycling your original payment from debt 1 onto debt 2 along with the overpayment. The pace at which the debt is paid off will speed up, as you recycle each previous debt payment to the next debt.

    Consolidation is rarely the right solution - approach with caution.
    I’m a Forum Ambassador and I support the Forum Team on the Budgeting & Bank Accounts, Credit Cards, Credit File & Ratings and Energy boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.

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  • I second what Dobbibill says and thanks DCFC79 for linking to my thread.



    Consolidation is rarely the right solution.
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