Consolidating loans to mortgage

wareing_c

Hi there 

Just after a bit of advice. We have two loans and a mortgage with Lloyds. We’re due to remortgage later this month and we’re wondering if it would make sense to see if we could consolidate the two loans into the mortgage and stay with Lloyds. 

For background, we pay around £650 for our mortgage and around £550 combined for the two loans. We haven’t missed any payments on any debt and would be doing this to try and bring down our monthly outgoings so we can start to try and pay more off our debt as currently don’t have any excess money each month to pay any more off our debt.

Thanks 

sammyjammy

Probably a really bad idea, you'd be swapping unsecured debt for that secured upon your home and short term debt for long term debt.  How much longer do you have to pay off the loans and how much is left on them?

runforlife

I would hazard a guess that the majority of people on here who have fell into serious debt have at some point consolidated loans. As Sammyjammy says consolidating unsecured debt to secured debt is not a good idea. If you do go ahead with consolidation can you be TOTALLY assured that you won’t spend again and be in the same position in a few months/years time? 

TripleH

If the loans are short term, consolidating them onto your mortgage will mean rather than clear them in say 3 years, you clear them in 20 years for example.

You also end up paying a lot more to clear the loan than if you hadn't added them on your mortgage.

Think of it as consolidating them on your mortgage is denying your future self.

Plus at the moment if you don't pay them, the worst case is a CCJ (not great but you can get by on a day to day basis).

Add them to your mortgage and the worst case by not paying is that you loose your home.

fatbelly

I agree with the others. get your remortgage sorted first  - go with the cheapest as you owe no loyalty to Lloyds.

Then look at how you can reduce the apr of your other borrowing.

Check your credit files ahead of this process as you don't want something rogue on there upsetting the apple cart.

enthusiasticsaver

No it would not make sense to consolidate the loans on to your mortgage as the others have said.  Deal with the remortgage first. What rates are you paying on the loans and how much and how long is left on them? 

EssexHebridean

I'm echoing others now, but no, Nope, Definitely not, absolutely never, NO! 

Consolidation is "kicking the can down the road" - it solves nothing - the debt is still there, just hidden, and what's more you very likely will be paying it off for longer and at a higher cost. Yes, the mortgage interest rate will be lower, but how many years left - 20? And how many years on each of the loans...? The maths will likely speak for themselves there.  You're also reducing the LTV on your home - which at a time when interest rates are only going to go in one direction, is most definitely NOT what you want to be doing. 

I'm going to be blunt here - what you're trying to do is to make life easier for yourself. So you consolidate - brilliant, suddenly you have all this spare money, great, eh? The issue is that you've not addressed why the debt arose to the extent that you were struggling with it in the first place. Give it a short while and you will be frittering the new "spare" money, then something will come along that you "need", but that's OK, because you can get a loan....see where this is going? Give it 5 years at best and you will be back there with far higher mortgage payments and more additional debt than you have right now - and at that stage it may well be past the point of easy management. 

First step - put together your SOA (Statement of affairs) there is a link in my signature and also a link to a different SOA calculator in one of the announcement posts at the top of the board. Complete it openly and honestly - it needs to be a full picture of how things are right now, warts and all. Take the "format for MSE" option and post it into here and we can take a look and see what savings we might be able to spot that you have missed. My guess is that you really have more spare cash each month currently than you think - it's just you're "losing" it. Once we have found that surplus for you, that needs to work towards clearing the debt sooner. Once the debt is cleared, you start putting 50% of what you were paying to debt, towards overpaying on your mortgage. In the meantime you will also be learning to put money aside for upcoming expenses - so setting aside an emergency fund, which will save you  needing to reach for credit when, for example, the washing machine keels over, or the car gives you a big bill.  You will also start saving upfront for things like insurances, meaning you pay annually and save any money you are currently wasting by paying in installments, assuming that you do.  

If you think life after consolidation will be easier - then you're right, but only for the (probably very) short term. Life after learning to actually manage your money though? That's a lifetime of "easier" right there. 

runforlife

Spot on Essex