Is this a good idea??

worriedDan

Hi everyone,

We are two years into our debt free mission and debt is now half of the original 65k!

Some of our remaining debt is spread across 2 Halifax credit cards and an overdraft. Halifax have given us the option to refinance this debt into one payment. I am be wary of consolidation as this is partly what led us to get into so much debt, however they have explained that they would immediately close down the credit card accounts and overdraft so we wouldn’t be able to use these any more.

Both of the credit cards are about to revert to standard interest rates or around 20%. The overdraft costs around £30 per month in fees etc. As it stands, the total for these 3 products would be £222 with £140 of guys being purely interest.

They are offering a rate of 9% with a monthly payment of £130. We can overpay (we already overpay massively each month) to reduce the term.

Seems like a no brainer but wanted to get your views before.

Halifax have confirmed that there will no credit check as we are existing customers. Will this loan look more favourable in our credit files compared to credit card debt? Not sure this would be viewed by other lenders.

Advice much appreciated

WD

Willing2Learn

worriedDan wrote: »

… We are two years into our debt free mission and debt is now half of the original 65k!

:T Congratulations. Give each other a pat on the back as you have both made excellent progress.

worriedDan wrote: »

... Some of our remaining debt is spread across 2 Halifax credit cards and an overdraft. Halifax have given us the option to refinance this debt into one payment. I am be wary of consolidation as this is partly what led us to get into so much debt...

This worries me. Are you sure you have acquired the necessary skills to stop the consolidation from increasing your overall debt? Do you have a monthly SOA that is accurate and that satisfactorily keeps you within budget each month?

If I am honest. I would be tempted if part of the deal is to settle and close your two credit cards, and to withdraw the overdraft facility. What other debts do you have though? Will there be temptation to overspend using your other forms of credit, because if so, then you should decline...

As an alternative, you may be eligible for a couple of new balance transfer cards on 0% APR promotions. Or you could get a 0% APR card that allows both a balance transfer and a money transfer so that you could repay the overdraft too.

In fact, why not post your current SOA so that we can see what your budget looks like and advise accordingly...

sourcrates

Hmmm, i would urge caution here, banks only offer deals such as this when it benefits them, as it will most certainly do in the long term, you will probebly pay as much in interest with this loan, if not more.

You are right to be wary of consolodation, its a very slippery slope for many, as you have previously found out, i would seriously urge you to concider other options here, the only solid way to pay down debt, without interest, (excluding insolvency options) is debt mangement, if the ultimate goal is to get rid of the debt, then credit files must take a back seat for now.

A debt mangement plan managed by stepchange, would, hopefully, see interest and charges stopped (new regulated debt mangement plans are soon to be available with compulsary stoppage of interest and legal protection from creditors) so all your money would be going to pay off the debt, that would be the sencible option to take, not further borrowing.

worriedDan

Willing2Learn wrote: »

:T Congratulations. Give each other a pat on the back as you have both made excellent progress.


This worries me. Are you sure you have acquired the necessary skills to stop the consolidation from increasing your overall debt? Do you have a monthly SOA that is accurate and that satisfactorily keeps you within budget each month?

If I am honest. I would be tempted if part of the deal is to settle and close your two credit cards, and to withdraw the overdraft facility. What other debts do you have though? Will there be temptation to overspend using your other forms of credit, because if so, then you should decline...

As an alternative, you may be eligible for a couple of new balance transfer cards on 0% APR promotions. Or you could get a 0% APR card that allows both a balance transfer and a money transfer so that you could repay the overdraft too.

In fact, why not post your current SOA so that we can see what your budget looks like and advise accordingly...

hi I have actually become quite debt adverse and the thought of ever taking on new debt fills me with dread. Back in the day we used consolidation several times but we wold then just respend on the cards, doubling the debt each time. We won't have this option with the refinance as the CC and OD are closed down and paid off automatically. Even without this I know that we have changed so much that it wouldn't be an issue.

We do have other debts spread across a loan and other low interest of 0% CC;s. We don't actually have the cards as there were cut up immediately - we basically use the balance transfer as a 0% or low interest loan. I can't remember that last time that we used a credit card.

I am looking at this as way of reducing interest. Our contractual payment will be £130 however we are going to pay £500 if we decide to go ahead. We are in a fortunate position that whilst we have quite a bit of debt, we have a decent income to chuck at it.

worriedDan

sourcrates wrote: »

Hmmm, i would urge caution here, banks only offer deals such as this when it benefits them, as it will most certainly do in the long term, you will probebly pay as much in interest with this loan, if not more.

You are right to be wary of consolodation, its a very slippery slope for many, as you have previously found out, i would seriously urge you to concider other options here, the only solid way to pay down debt, without interest, (excluding insolvency options) is debt mangement, if the ultimate goal is to get rid of the debt, then credit files must take a back seat for now.

A debt mangement plan managed by stepchange, would, hopefully, see interest and charges stopped (new regulated debt mangement plans are soon to be available with compulsary stoppage of interest and legal protection from creditors) so all your money would be going to pay off the debt, that would be the sencible option to take, not further borrowing.

Hi Sourcrates

We did speak to step change at the start of our journey however we were told that a DMP would not be an option as despite our debts being high, we were able to pay our minimum payments whilst also covering our living costs. My understanding was/is that DMP's are for people who cannot afford their contractual payments.

We have only been offered the refinance with Halifax as they have offered support due to some ongoing mental health issues that I have been dealing with. I struggle quite badly with anxiety and the thought of interest being accrued started to worry me so I called and spoke to the customer priority team who have been very supportive and helpful.

Ideally we would transfer the debt to a new 0% offer, however these appear to be becoming more and more difficult to obtain.

I understand your concerns regarding consolidation, however the idea of racking up more debt fills me with dread.We both desperately want to be debt free and this seems like a way of making sure that more of our money is actually reducing the debt, as opposed to servicing interest.

DD265

I'd check the eligibility calculators here first. You may be able to get a cheaper loan, or a 0% balance/money transfer card to help with it. 9% feels quite high to me.

https://www.moneysavingexpert.com/eligibility/loans-calculator/

https://www.moneysavingexpert.com/eligibility/credit-cards/

worriedDan

Still unsure of what to do. Have looked at eligibility calcs and it doesn;t look like we are eligible for anything at present. Quite surprised by this as we don't have late payments etc. Our credit scores are 'fair' and I think that our level of debt and percentage utilisation is an issue as many of our credit cards reduced our limits as the balanced decreased. We have also applied for 0% offers within the last 6 months which apparently also impacts on credit scores.

I still don't like the idea of consolidation however the alternative is to pay £130 interest each month.

Feels like we are stuck between a rock and a hard place

Dobbibill

A SOA is a must before any suggestions.

You don't say how much you owe on your Halifax cards or overdraft.

With the ability to overpay by £500 each month, how long would it take you to hammer down those debts throwing all this extra money at them?


A huge well done on getting half your debt repaid in 2 yrs, that's a fantastic acheivement.

getmore4less

Full SOA before proceeding.

How much in the OD £30 fees will probably translate into a high APR.

I would(subject to SOA) take the offer then snowball(properly not the daft American way) and look for spend 0% credit cards to reduce the debt quicker.

BT cards come with fees so dilute the 0%

enthusiasticsaver

I remember your previous threads and well done on getting half the debt cleared and I am surprised this has not led to you getting more 0% offers. As you say it may be down to credit utilisation.

Regardless of this I still would not consolidate as almost always it works out more expensive as the loan will be over a longer period undoubtedly and it lulls you into a false sense of security that you have your debt under control. If you have halved your debt in two years in spite of still paying interest presumably it will be cleared in the next two years? How long would the loan be repaid over?

enthusiasticsaver

worriedDan wrote: »

hi I have actually become quite debt adverse and the thought of ever taking on new debt fills me with dread. Back in the day we used consolidation several times but we wold then just respend on the cards, doubling the debt each time. We won't have this option with the refinance as the CC and OD are closed down and paid off automatically. Even without this I know that we have changed so much that it wouldn't be an issue.

We do have other debts spread across a loan and other low interest of 0% CC;s. We don't actually have the cards as there were cut up immediately - we basically use the balance transfer as a 0% or low interest loan. I can't remember that last time that we used a credit card.

I am looking at this as way of reducing interest. Our contractual payment will be £130 however we are going to pay £500 if we decide to go ahead. We are in a fortunate position that whilst we have quite a bit of debt, we have a decent income to chuck at it.

So why don't you take a loan over a shorter period with a higher monthly repayment if you can afford it? How long would that take to repay?