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

Agentmomo

Hi Bettycheese,
I have personally took out two secured loans over the years. First one was a disaster, I was young, naive and didn't realise the consequences and almost lost my house, The second time was better but not ideal. What I really needed to do was face facts and alter my lifestyle. It's took a long time and I am now almost debt free....But that is my journey and not necessarily applicable to you.

What does concern me on your latest post is that your partner is not working and now setting up their own business which I really do hope is successful for you both. With that in mind do you really need another loan tied to your house? Believe me a secured loan company will not think twice to take your home off you, Credit card companies will not. No matter what dire straits you may find yourself in. Please do bear that in mind when making your decision.

BabyStepper

It seems you have realised that having £40k of debt is a problem. Well done for waking up to this and asking for help, that's huge. Bravo!

By all means consolidate if you want, but you need to understand what you're doing. Consolidation does not make the debt go away, it just moves it somewhere else, somewhere you can convince yourself you don't have to worry about it so much. 

Here's the numbers:

£40k on 0% ccs will cost you £40k to repay (plus the odd transfer fee of a few hundred quid). If you can't pay at any point, you can do a dmp or similar and your home is protected.

£40k added to a mortgage at 2.5% over 15 years will cost you £48k to repay. Yes, that's £8k more. If you can't make payments then your home will be sold to repay your debt. 

If you're asking us should you do something almost for free, or spend £8k doing it, I know my answer every time. 

Best of luck whatever you decide. 

Billy_B_North

Do you really think that you need fifteen years to pay this back? Will you have no additional expenses in the next fifteen years; no children, house moves, boiler replacement etc?

If you can find a way to cut back on your spending, and increase your outcome, this will probably be a much better route out of this.

How much are you currently saving per month, or reducing your debt by?

Bettycheese

BabyStepper said:

It seems you have realised that having £40k of debt is a problem. Well done for waking up to this and asking for help, that's huge. Bravo!

By all means consolidate if you want, but you need to understand what you're doing. Consolidation does not make the debt go away, it just moves it somewhere else, somewhere you can convince yourself you don't have to worry about it so much. 

Here's the numbers:

£40k on 0% ccs will cost you £40k to repay (plus the odd transfer fee of a few hundred quid). If you can't pay at any point, you can do a dmp or similar and your home is protected.

£40k added to a mortgage at 2.5% over 15 years will cost you £48k to repay. Yes, that's £8k more. If you can't make payments then your home will be sold to repay your debt. 

If you're asking us should you do something almost for free, or spend £8k doing it, I know my answer every time. 

Best of luck whatever you decide. 

@BabyStepper thank you for taking the time to reply. My main worry is that one of the cedit cards (my partners) is at standard Barclaycard (I think) interest rate, and he can't move to a 0% card as he has been unemployed since September, and is now just starting a company so is unlikely to be accepted on to a new card. His card is currently costing us in the region of £400 a month in minimum payments.  The rest of the debts don't worry me as much as my cc is 0% and I have another empty card that I will be able to move that to at 0% when the term ends, and the bank loans are manageable and being paid off steadily each month.

Bettycheese

Billy_B_North said:

Do you really think that you need fifteen years to pay this back? Will you have no additional expenses in the next fifteen years; no children, house moves, boiler replacement etc?

If you can find a way to cut back on your spending, and increase your outcome, this will probably be a much better route out of this.

How much are you currently saving per month, or reducing your debt by?

Thanks Billy_B_North we are currently not paying anything off, just minimum as my partner has been unemployed since September and we can't currently afford any more. However, he is just launching a company (in something he is very experienced in, which should all go to plan be making an income form around April/May). I do of course realise that this isn't a given, and have been the first to point this out, believe me. My partner is very aware that if in a few months the income isn't what is expected/hoped/needed, then he will have to go back into full time employment.

Bettycheese

Agentmomo said:

Hi Bettycheese,
I have personally took out two secured loans over the years. First one was a disaster, I was young, naive and didn't realise the consequences and almost lost my house, The second time was better but not ideal. What I really needed to do was face facts and alter my lifestyle. It's took a long time and I am now almost debt free....But that is my journey and not necessarily applicable to you.

What does concern me on your latest post is that your partner is not working and now setting up their own business which I really do hope is successful for you both. With that in mind do you really need another loan tied to your house? Believe me a secured loan company will not think twice to take your home off you, Credit card companies will not. No matter what dire straits you may find yourself in. Please do bear that in mind when making your decision.

@Agentmomo thank you for replying. From all the good advice I have received on here, I no longer think a secured loan is the right way for us to go (and indeed probbaly not available to us now anyway with my Partner just starting a company). We are steadily paying off the bank loans; we need to concentrate on paying the interest accruing credit card off as quickly as possible, the 0% cc debt would be next, and the bank loans are already being paid off steadly month by month.

BabyStepper

I know you're reluctant to do this, but the most mse way to improve this situation is to move your partner's high interest card to your 0% card. I don't know how long you've been together, how commited you both are, but when me and my OH were paying off debt we didn't care whose name the cards were in, if we could get a 0% transfer we just did it. Maybe naive and trusting, but it worked out ok in the end.  

I have a few questions but you've possibly already answered them so I should go back and check. I'm mostly wondering when your loans end and when your 0% deal ends. I know things are tight, but if you were living on the same budget but the debt was going down faster, it would be a big help in keeping your spirits up. There is always, always a way out, even when it seems dire.

I hope your partner's new business is successful and your income increases soon. With or without this, having a plan is a good idea. Changes to your family finances then push you along the way, faster or slower, whatever, but you're still headed in the same direction.