Debt consolidation affects

emsikins

Good evening,

I’ve not been around for a while but am coming back to try and re-motivate myself in getting debt free. I’m hoping for a little advice too...

We currently have a number of debts (mainly credit cards but overdrafts and a kitchen finance plan too!) totalling £16,815 and we’re weighing up taking out a personal loan to consolidate them. We currently pay £375 per month on fees, minimum payments etc. Based on our minimum payments only it’ll take us 6 years to clear the cards alone. However, using a quick loan calculator we could clear all but one 0% card (no point adding interest to that!) within 5 years paying £252.80 per month. That gives extra to throw at the final card which we’d hopefully clear within the first 2-3 years, and a bit of a buffer so we hopefully avoid using the dreaded cards again.

It seems a no brainier but we’re nervous as we have our mortgage renewal that will be due in the next three years. Aside from the nervousness of committing to paying a set fee for five years (eeep!) one concern is that a loan will affect the mortgage renewal. We’ve no idea how taking out a new loan, paying off the kitchen early with it etc will affect our credit score.

We’ve never missed a payment on the cards so could carry on as we are but will having several debts, even if we’re paying them off, be more detrimental to us at mortgage time or will taking out new credit to such a high value be more damaging?

If anyone is able to offer some advice on whether a personal loan is a good or bad idea in terms of the impact it’ll have on our mortgage I’d really appreciate it!

[Deleted User]

Firstly you don't have a credit score its a made up number,you do have a credit history. If your mortgage isn't due for renewal for 3 years I doubt action taken now will effect it.
However the danger always is that you consolidate your debts and then after a while start to run up new debt. If you can avoid that then and only then might consolidation be an idea.

emsikins

venison wrote: »

Firstly you don't have a credit score its a made up number,you do have a credit history. If your mortgage isn't due for renewal for 3 years I doubt action taken now will effect it.
However the danger always is that you consolidate your debts and then after a while start to run up new debt. If you can avoid that then and only then might consolidation be an idea.

Thanks for replying, sorry credit score/history are interchangeable in my head but I understand what you’re saying. I think generally we have a reasonable credit history, despite having several cards, so I guess hopefully the loan wouldn’t damage that!

sourcrates

Consolidation is rarely the best choice, people tend to reopen the consolidated lines of credit, and end up with twice the debt.

Many people do it, it’s considered to be a side step on the road to bankruptcy for a lot of people, debt management is the correct way to deal with problem debt, not further borrowing.

emsikins

sourcrates wrote: »

Consolidation is rarely the best choice, people tend to reopen the consolidated lines of credit, and end up with twice the debt.

Many people do it, it’s considered to be a side step on the road to bankruptcy for a lot of people, debt management is the correct way to deal with problem debt, not further borrowing.

Thanks sourcrates, some food for thought. I can see what you mean about people opening old lines of credit again but I think the thing that I’m considering is, we’re paying so much each month on repayments that we never miss but it does leave our budget quite tight. I don’t know whether the smaller payments of the loan would give us the breathing space we need to avoid using cards again in the future? There’s a lot to consider. Perhaps we need to get our spending habits down for a few months first and see how we go first. If we manage that then we know the loan would be manageable without the need for extra credit...

chelseablue

Do you still have the credit cards? I would cut them all up and see if you can manage without them for a few months before doing anything else

emsikins

chelseablue wrote: »

Do you still have the credit cards? I would cut them all up and see if you can manage without them for a few months before doing anything else

Yes we do, that’s what I’m wondering about. If we can manage without them for a while then maybe a loan would be a good option to reduce the interest and clear everything quicker?

MallyGirl

emsikins wrote: »

Thanks sourcrates, some food for thought. I can see what you mean about people opening old lines of credit again but I think the thing that I’m considering is, we’re paying so much each month on repayments that we never miss but it does leave our budget quite tight. I don’t know whether the smaller payments of the loan would give us the breathing space we need to avoid using cards again in the future? There’s a lot to consider. Perhaps we need to get our spending habits down for a few months first and see how we go first. If we manage that then we know the loan would be manageable without the need for extra credit...

or you could bring the spending down, freeing up some space in the budget. Then, if you are certain sure that you won't start building up more debt, you could take a loan and pay everything off. The loan should be paying back at more like the £375 (as you will have made this more comfortable with some economies) and you will be debt free in less than 4 years. 2 pronged attack.

emsikins

MallyGirl wrote: »

or you could bring the spending down, freeing up some space in the budget. Then, if you are certain sure that you won't start building up more debt, you could take a loan and pay everything off. The loan should be paying back at more like the £375 (as you will have made this more comfortable with some economies) and you will be debt free in less than 4 years. 2 pronged attack.

I like your thinking! So, plan of action is to get spending down and start chipping away at the debt. Once we find a balance that we’re comfortable and can work with, see about a loan that might be the same amount as the current total payments but would clear them quicker? Ok, feeling a bit happier now...!