Debt advice - is consolidation good/bad idea, or even possible?

Bettycheese

My partner and I have debts totalling aorund £40k. 2 x credit cards at approx £10k each (one interest free, the other high interest) and 3 bank loans totalling approx £20k.  We are homeowners with a mortgage, and had been considering looking at a secured loan to consolidate debts over around 10-15 years, with the aim of bringing our monthly repayments down significantly, and losing the credit card debt that has a high interest rate (unable to currently move this debt to an interest free card as it is my partners, and he has recently become self-employed), but it has been suggested to us that this is a terrible idea. We're currently looking in to talking to a financial advisor, and happy to pay for decent advice, but thought would try here for any thoughts/ideas. I don't think adding to our mortgage is possible as we recently got a new mortgage deal, and are at maximum ltv. The bank loans are at a manageable repayment level for us and are steadily being pad off, but it's the credit card with a £10k debt, and high interest that is the killer in terms of monthly repayment. Please don't repsond to criticise or judge how we got to this point, but if you have any useful advice would be great to hear form you. Thank you.

ZaSa1418

it is a bad idea to change unsecured debt to secured debt. Can you take some payment holidays if you are struggling? 

Viki2410

It totally depends on you I believe. If you can consolidate your debt, then not wrack up more on your cards, then yeah it would work for you. But if you consolidate it and then carry on spending on the cards, it won't be worth it. Best thing you can do is look at your outgoings and work out a budget from there that is realistic and you can stick to. Consolodation worked for us, but we religiously stuck to the budget we made and haven't built debt back up on teh cards. We have used them yeah, but paid them off in full each month. Good luck in whatever you decide to do.

Bettycheese

@ZaSa1418 thanks for replying. I really don;t know whether a secured loan would be a terrible idea, but on another forum, the first couple of people jumped straight on to tell me that it was a bad idea, and a major no-no. As I said, we will take some professional advice, but just wondered what others thought, and would be interested to hear how it may have worked (or not) for other people. Thanks.

Bettycheese

@Viki2410 thanks. If we could shift the credit card debt, we have no need or intention of using them, and indeed haven't for a long time. Thanks.

ZaSa1418

Bettycheese said:

@ZaSa1418 thanks for replying. I really don;t know whether a secured loan would be a terrible idea, but on another forum, the first couple of people jumped straight on to tell me that it was a bad idea, and a major no-no. As I said, we will take some professional advice, but just wondered what others thought, and would be interested to hear how it may have worked (or not) for other people. Thanks.

How safe if your job at the moment? 
I would personally never move unsecured debt to secured against my home, this would be a huge last resort. 
Have you gone through all your monthly spends and tried to cut back? How long has your partner not been earning? Have you taken the payment holidays that many places are offering due to covid? 

Penguin_

Bettycheese said:

@Viki2410 thanks. If we could shift the credit card debt, we have no need or intention of using them, and indeed haven't for a long time. Thanks.

So to look at it easily, how did you get into the CC debt? Holidays? Shopping habits? Gambling? What is there to stop you getting back into such a situation if the balances are paid? Have you only come to this realisation because you have the debt & can't afford to pay it off or have realised just how much you're repaying a month? If so, how can you be sure you won't feel "oh well it's only a couple of hundred pounds, I'll bung it on the CC & clear it next month" but then you don't clear it & you may add a bit more until you're back where you started but now you have the secured loan too.

I only mention this because that's how I got into a mess.

Bettycheese

Penguin_ said:

Bettycheese said:

@Viki2410 thanks. If we could shift the credit card debt, we have no need or intention of using them, and indeed haven't for a long time. Thanks.

So to look at it easily, how did you get into the CC debt? Holidays? Shopping habits? Gambling? What is there to stop you getting back into such a situation if the balances are paid? Have you only come to this realisation because you have the debt & can't afford to pay it off or have realised just how much you're repaying a month? If so, how can you be sure you won't feel "oh well it's only a couple of hundred pounds, I'll bung it on the CC & clear it next month" but then you don't clear it & you may add a bit more until you're back where you started but now you have the secured loan too.

I only mention this because that's how I got into a mess.

@Penguin_ Thank you, and I understand what you're saying and reason for asking the question. The debts were from a one-off house renovation that ended up spiralling beyond planned budget/works. It was not through 'lifestyle' or any vice etc, and we are genuinely confident we don't want or need to use them going forward.

Naomim

The general consensus on these boards is not to consolidate debt and certainly don't turn unsecured debt into secured debt.  But if you feel it's your only option and can work for you, then it's always worth considering.  Are you currently meeting all your payments? Are you only paying minimums?  If you could put your figures into a snowball calculator or look at avalanche payments and work out whether the cost of interest on the cards against the cost of interest against your mortgage term which is the more viable?  I bet the interest paid on the mortgage would be higher than the interest paid on the card but it's a harder short term hit compared to securing the debt.

A lot of us, me included have high debts because we consolidated and then carried on spending on the cards so you really have to make sure your budget is set and prepared for you to stick to.  

Are you working together to clear the debts or individually or together?  I ask as if it's together, could you BT some of his credit card debt or would you be willing to if you could?

Good luck

Naomim

Penguin_

Bettycheese said:

Penguin_ said:

Bettycheese said:

@Viki2410 thanks. If we could shift the credit card debt, we have no need or intention of using them, and indeed haven't for a long time. Thanks.

So to look at it easily, how did you get into the CC debt? Holidays? Shopping habits? Gambling? What is there to stop you getting back into such a situation if the balances are paid? Have you only come to this realisation because you have the debt & can't afford to pay it off or have realised just how much you're repaying a month? If so, how can you be sure you won't feel "oh well it's only a couple of hundred pounds, I'll bung it on the CC & clear it next month" but then you don't clear it & you may add a bit more until you're back where you started but now you have the secured loan too.

I only mention this because that's how I got into a mess.

@Penguin_ Thank you, and I understand what you're saying and reason for asking the question. The debts were from a one-off house renovation that ended up spiralling beyond planned budget/works. It was not through 'lifestyle' or any vice etc, and we are genuinely confident we don't want or need to use them going forward.

Before looking at turning unsecured debt into secured debt, my advice would be to post a SOA & be brutally honest with what you spend each month. From there, the more knowledge folk on here will be able to help you see your options. I am one who says there are better ways to go than securing your debt.

Bettycheese

@Naomim thank you. What does 'BT some of his credit card' mean? Thanks.