Trying to consolidate debts

Pilch8129

Hi,



Having seen that overdraft rates are about to increase I am in a position where I would like to try and consolidate a few debts into a more manageable situation, and ultimately work to get out of it.



As a brief overview my husband and I have had a difficult year financially, he was in sales on a commission pay which wasn't paying well, then lost his job (but fortunately is now back in work on a fixed salary). Through all this I have been supporting him/us through my fixed salary but I've had to extend my overdraft and take out a poor credit card to get us through.



I would like to get out of my overdraft - £550 which I end up at the end of each month - and try to start getting rid of my credit card - Aqua card balance £ 1,100 that I'm trying to pay off at £40 p/month. I would like to be in a place where we can start to put money away as we have no savings.



The last time I visited my bank they offered an extension to one of my loans if I wanted to borrow more. In part of my brain it wold make sense to extend it, pay off the debts and tie everything up nicely. But I'm wondering if there are any better options out there, or do I just keep plodding on?

Louoffofsparkle

Have you done a soa to see where your money actually goes? Once you look at this you might find areas that you can save money on. Then use debt snowball calculator to have a goal to work towards.

Consolidation rarely works, I’ve tried it before and ended up in double the debt. However I did consolidate last year- once I had done my budget properly and worked out why I overspent. All my aprs were over 40% and some much more, my husband took a joint loan with me at 8% apr.
All cards cancelled once cleared.

EssexHebridean

Please don't consolidate at least until you have done the background work of the SOA and working on your budget. Agree that the overdraft needs to go - but have you checked on eligibility for 0% BT cards for the CC balance?

The poster above sums up consolidation - it DOES rarely work unless someone has learned the lessons and gone through the process of paying down debt first. You learn a lot from months of paying off and it does reduce the risk, for many, of ending up in even more debt down the line.

Get the SOA done, post it in this thread and we can take a look and maybe spot some savings that you have missed, or advise ways of restructuring things.

enthusiasticsaver

I agree with EH and Lou. Don't consolidate as it rarely works and in fact usually makes things worse. If you have a decent credit record I would say move the overdraft to a interest free money transfer card but if you were only able to get an Aqua which is an awful rate you won't be able to get any good deals at the moment.

The soa is a good start to see where you are spending and if you can cut down. Even doing something simple like taking all lunches to work or doing away with takeaways/coffees out and cutting down on alcohol and meal planning can make a massive difference. Your debt is not huge so I think you could probably get rid of it reasonably quickly now your husband is back at work if you apply some financial discipline. More borrowing, whether consolidation or not is never the answer though.

MallyGirl

Pilch8129 wrote: »

The last time I visited my bank they offered an extension to one of my loans if I wanted to borrow more. In part of my brain it wold make sense to extend it, pay off the debts and tie everything up nicely. But I'm wondering if there are any better options out there, or do I just keep plodding on?

The first thing I would say is that you would not be paying off the debt - you would just be moving it. You would also potentially be paying back more as the loan would be over a longer period. Debts don't need to be 'tied up nicely' - you just need to know exactly who you owe and at what rate. Then you can plan the best approach to paying them off as soon as possible. The SOA, alongside a spending diary which covers every last penny that you both spend, is the way forward.

-taff

Your best options are to

1] post an SOA to so people can hopefully offer advice where you could save instead of spend and vice versa
2] go through your finances with a toothcomb from the last few months to see where you are spending money and if there's anythig you can cut back on.
Then you can look into ther ways of saving, such as YS shopping, batch cooking, selling any unwanted items on ebay, what other methods of income you could try.


In the vast majority of cases consolidation does not work [been there, bought the picture]. What it does is lull you into a false sense of security that you only owe [love this phrase] one affordable monthly payment'. There is nothing difficult about pyaing what you're paying now, you just have to be disciplined to work out whats coming in and when, and then budget accordingly.
If you are having dificulty in paying what you're paying now then again, there are other options.
You will have to take control of the finances.

fatbelly

I'm with Taff on this one.

Banks like to sell loans ( at medium rates) to clear their overdrafts (at exorbitant rates) - it's great business for them.

There are smarter ways to get out f it. Have you read Martin's article

https://www.moneysavingexpert.com/banking/cut-overdraft-costs/

If you post an soa we can make better suggestions

D_M_E

Another here who agrees that consolidation is a waste of money.

Fill in the SOA here

https://www.lemonfool.co.uk/financecalculators/soa.php

format for MSE and paste here and people will go over it and give some tips which may help.

[Deleted User]

We know that consolidation doesn't always work but in the OP's case it may work to avoid potential interest of 40%. If cheaper borrowing isn't available to them then how would this type of consolidation be any different to more fortunate people moving debt around between cheap credit cards chasing lower interest?

EssexHebridean

Missu wrote: »

We know that consolidation doesn't always work but in the OP's case it may work to avoid potential interest of 40%. If cheaper borrowing isn't available to them then how would this type of consolidation be any different to more fortunate people moving debt around between cheap credit cards chasing lower interest?

Until and unless a proper budget is put in place and has been tried and tested, it's almost certain that consolidation will NOT work. a budget is the mechanism by which you not only know what you have to spend on certain areas of your life, but also by which you set aside money on a monthly basis to cover certain less frequent costs, insurances, holidays, car maintenance costs for example. No budget = the temptation to just pay for those things anyway, and as there are then no savings because those haven't been budgeted for either, the easiest route to cover the costs is usually to reach for credit.