Are consolidation loans all nonsense?

enthusiasticsaver

Any investment returning more than 15-20% must carry an element of risk so you may want to look at that again and decide whether it is worth keeping that whilst paying extortionate rates for debt.

As sourcrates says consolidation loans rarely work but people often go through the same cycle time after time before realising the problem is usually overspending and all the consolidation loans do is delay the moment the debt actually has to be repaid and by then many thousands of pounds in interesting have been wasted and usually the debt is much higher. The reason the rates are higher is because the banks know there is a risk they won't get their money back as the borrower does not have sound finances. 

pelirocco

StMilMo said:

Quick question - based on some initial investigations and phone calls it seems that every "debt consolidation" loan comes with a MUCH higher APR than even the worst cards/loans rate. The most recent place was very reluctant to mention an APR, but I pressed the point, and he mumbled "sixtyorseventypercent" before continuing the ramble about wanting to help me and understand my circumstances.

I have some debt at 15-20% which I can afford to service for the time being but IF loans existed for this purpose at lower rates I would of course look into it. Is it a wild goose chase, though?

My bank gave me a 5.3% loan to clear off credit card and over draft
I closed  credit card and took over draft facility away .I have a specific savings account  to ' overpay ' loan to use to pay it off ,i will get charged 58 days interest but over all savings are significant 

sourcrates

pelirocco said:

StMilMo said:

Quick question - based on some initial investigations and phone calls it seems that every "debt consolidation" loan comes with a MUCH higher APR than even the worst cards/loans rate. The most recent place was very reluctant to mention an APR, but I pressed the point, and he mumbled "sixtyorseventypercent" before continuing the ramble about wanting to help me and understand my circumstances.

I have some debt at 15-20% which I can afford to service for the time being but IF loans existed for this purpose at lower rates I would of course look into it. Is it a wild goose chase, though?

My bank gave me a 5.3% loan to clear off credit card and over draft
I closed  credit card and took over draft facility away .I have a specific savings account  to ' overpay ' loan to use to pay it off ,i will get charged 58 days interest but over all savings are significant 

In certain situations, these kind of loans can work, but you would be hard pressed to find a consolodation loan at the 5% mark these days, plus you have to completly change the way you deal with money, in order for it to work out for you.

For the majority of people, who don`t change their habits, its just another stepping stone on the way to insolvency or debt management, or some other debt solution, these are the ultimate game changers, which eventually get you out of debt, permanantly.

However, we humans are fickle things, even bankrupts sometimes don`t learn, and end up rinsing and repeating, look at Trump, bankrupt 16 times i believe, i wonder how many "consolodation" loan`s he has had !!

[Deleted User]

I enquired about one from a company called Aspire once and the total to pay back was going to be 3x the loan amount. I didn't even think about it for a second, it was a no from the off!

[Deleted User]

I remember in the run up to the 2008 financial crisis seeing adverts on the tv from companies such as First Plus that went along the lines of.....

"Are you up to your neck in debt?  Are you crap and borrowing money and repaying it according to the T&C you agreed to?  Do you have CCJ?  Why not take a loan of up to £25,000 out and secure it against your home for the next 20 years?"

Those loans have variable interest rates that only appear to vary one way.  I bet most of those people would have been better with a DMP.

TheAble

Lover_of_Lycra said:

I remember in the run up to the 2008 financial crisis seeing adverts on the tv from companies such as First Plus that went along the lines of.....

"Are you up to your neck in debt?  Are you crap and borrowing money and repaying it according to the T&C you agreed to?  Do you have CCJ?  Why not take a loan of up to £25,000 out and secure it against your home for the next 20 years?"

Those loans have variable interest rates that only appear to vary one way.  I bet most of those people would have been better with a DMP.

"One simple monthly payment!"

fatbelly

Lover_of_Lycra said:

I remember in the run up to the 2008 financial crisis seeing adverts on the tv from companies such as First Plus that went along the lines of.....

"Are you up to your neck in debt?  Are you crap and borrowing money and repaying it according to the T&C you agreed to?  Do you have CCJ?  Why not take a loan of up to £25,000 out and secure it against your home for the next 20 years?"

Those loans have variable interest rates that only appear to vary one way.  I bet most of those people would have been better with a DMP.

Yes. I remember those because I was running a court desk on possession days. We were trying to defend around 30 people per session who hadn't realised that non-payment of a secured loan for a couple of months meant that the lender would apply for possession of their house.

pelirocco

sourcrates said:

pelirocco said:

StMilMo said:

Quick question - based on some initial investigations and phone calls it seems that every "debt consolidation" loan comes with a MUCH higher APR than even the worst cards/loans rate. The most recent place was very reluctant to mention an APR, but I pressed the point, and he mumbled "sixtyorseventypercent" before continuing the ramble about wanting to help me and understand my circumstances.

I have some debt at 15-20% which I can afford to service for the time being but IF loans existed for this purpose at lower rates I would of course look into it. Is it a wild goose chase, though?

My bank gave me a 5.3% loan to clear off credit card and over draft
I closed  credit card and took over draft facility away .I have a specific savings account  to ' overpay ' loan to use to pay it off ,i will get charged 58 days interest but over all savings are significant 

In certain situations, these kind of loans can work, but you would be hard pressed to find a consolodation loan at the 5% mark these days, plus you have to completly change the way you deal with money, in order for it to work out for you.

For the majority of people, who don`t change their habits, its just another stepping stone on the way to insolvency or debt management, or some other debt solution, these are the ultimate game changers, which eventually get you out of debt, permanantly.

However, we humans are fickle things, even bankrupts sometimes don`t learn, and end up rinsing and repeating, look at Trump, bankrupt 16 times i believe, i wonder how many "consolodation" loan`s he has had !!

After re reading the posts I realise it was probably aimed at the loans that are specifically  aimed at consolodation  which  all seem to have very high % .I can understand  why people go for them as it can appear  an easy option  and  most of us prefer  not to face up to difficult  questions 
Mine came about to pay a tax bill when we had a particularly  difficult business year ( 2 huge bad debts in a few months ) and it just hung about because asI paid it down ,I got in the habit of using it for mainly crap .
I closed down all cards but left £3k limit on one   ,incase I need protection  for any future purchase.....normally holidays ,but can't see that happening any time soon!