I've consolidated all my debts into 2 loans. Need some opinions on my next steps

Suspiciouscrowegg

So I wasn't in crushing debt territory but I was well on my way. I've consolidated everything into 2 loans £5450 over a 7 year term with 28.5% APR minimum payment is £137.50 per month And £1500 over a 3 year term 16.2% APR minimum payment £54.35 per month. After 8 months I have the option to top up my loan and borrow more I've calculated all my bills and if I go for a no fun approach I can pay about £300 overpayment per month. I'm in a relationship so no fun probably won't be possible every month so let's call it £200 Now both loans give me the option to make over payments to either reduce the loan term or reduce the minimum payments. Heres my initial plan, let me know if this sounds sensible. I'll pay the minimum payment every month on the 16.2% loan. On the 28.5% I'm going to pour every available bit of money into it, to at first reduce the minimum repayment to free up more monthly money. After that I'll start reducing the term After 8 months I'll look at either topping up the 16.2% loan and consolidating the other loan for a lower APR Once I'm in a good position, I'll take out a credit card with a 0% APR deal that I can pay off before the deal is finished. This will all still take a few years but I can see myself being nearly debt free by the end of the year

BrassicWoman

Why do you need to reduce the monthly payment if you have £200 spare a month already? Just reduce the term.

Suspiciouscrowegg

That's a good point, I think in my head it freed up more money to put back into the loans but you're right, it wouldn't matter I was paying over the minimum amount anyway!

sourcrates

You must, must, close down the consolidated lines of credit, as its all too easy to start spending on them again, thinking it won`t matter, then before you know it, back in debt again, only this time double the amount.

It happens quite a lot, you must be disciplined.

DCFC79

Do you want the debt gone ?
If you do then why not put £300 towards it ? 

MrFrugalFever

By your calculation you can afford to pay £491.85per month to your debts. Your debt totals just under £7,000. At best that’s 14.23 months on 0%, with the interest rate involved at worst it’s a couple of years. 

Always go for reducing the highest interest bearing first. I fail to see what you being in a relationship has to do with your monthly payments?

As mentioned above, close down every other credit facility to remove the temptation to re-spend, this is how debt becomes an unmanageable problem.

zippygeorgeandben

It's a shame you didn't come on here for advice before taking out these loans.  Very rarely do consolidation loans work, and I know this from experience.

Jami74

Pay an extra £275 (2 months overpayment) to the highest interest one each month. Then you'll be debt free in 3 years. If your relationship costs more than £25 a month then cut back elsewhere for that extra 'fun'.
Or
Pay an extra £300 toward the lower loan. It'll be gone in 6 months. It won't save as much interest over the long run but would free up £354.35 each month. Then pay £275 extra each month to the higher interest loan and have it paid off in a couple of years.

macman

If you think paying 28.5% APR is a good deal, then I shudder to think what you were paying before consolidating.

[Deleted User]

To add to what @sourcrates said about closing down your previous lines of credit you need to ensure you budget, that your budget is realistic and that you stick to it otherwise you’ll end up on the consolidation death spiral. 

MrFrugalFever

Lover_of_Lycra said:

To add to what @sourcrates said about closing down your previous lines of credit you need to ensure you budget, that your budget is realistic and that you stick to it otherwise you’ll end up on the consolidation death spiral. 

Haha “consolidation death spiral” indeed! You consolidate the consolidated consolidation eventually ending up in a.....f’ing mess. 😂