Debt consolidation

HRW2328

I’m looking at ways to consolidate existing debt - to pay off as much as possible in the shortest space of time. The likely increase in credit card interest rates is making me think I should look at doing something different to help avoid a debt spiral? 

Currently my main debts consist of 2 credit cards both with around £4000 on them and a hire purchase loan for my car - outstanding amount of £10942.

both credit cards have an apr of around 24% - I have checked my eligibility for balance transfer to 0% but don’t appear to be eligible for any. 

 Car finance has 4 years remaining and is fixed rate of 6.72%. 

I currently pay £530 a month on these debts, one credit card I’m currently only making the minimum payment and the other around £120 over the minimum. (Monthly repayments are affordable, however I’m aware that this debt will continue for sometime if I don’t make some changes).

I have looked at Ioans using MSE eligibility calculator and been pre approved for a loan which would pay off all the debt for monthly payments of £30 a month less then I pay now over 4 years with an apr of 8.7%. 

Has anyone recently done anything similar? Is the change in interest rates likely to make me much worse off if I leave my situation as it is? 

Looking for any helpful advice to become debt free asap. 

Best wishes

Ebe_Scrooge

The usual advice is that debt consolidation is rarely a good idea - for 2 reasons.  Firstly, the danger is that you take out a loan to clear the credit cards, then merrily rack up fresh debt on the cards.  Within a few months, you're suddenly looking at twice the debt you started with.

Secondly, you may find it hard to get a loan at a decent rate, due to affordability checks.  Any lender has to make the assumption that any new borrowing will be in addition to, not instead of, your existing debt.  They don't know whether you'll really use the new loan to repay your debt, or whether you'll put the whole lot on "Limping Larry" in the 3:30 at Cheltenham.

HRW2328 said:

I have looked at Ioans using MSE eligibility calculator and been pre approved for a loan which would pay off all the debt for monthly payments of £30 a month less then I pay now over 4 years with an apr of 8.7%.

Do bear in mind that the pre-approval on these eligibility tools is, at best, a rough guide.  There's no guarantee that you'd actually be accepted for a loan when you come to make a full application - or, if you are, it may be at a much higher rate of interest.  Also, work out the overall cost.  Yes your monthly repayments may be lower, but if the term of the loan is longer than the terms of your existing debt, then you may well end up paying far more overall.  Also, it doesn't make sense to replace your car finance which is at 6.72% with a loan that's charging 8.7%

Your best bet is to tackle the credit card debt head-on.  Cut down your spending, cut out any non-essential spends, increase your income if possible (even a part-time evening job for a few hours a week will bring in some extra cash).  Throw every spare penny at the debt.  A few months of austerity will repay you many times over in the long run.

If you post up a detailed SOA the good folk here will be able to offer plenty of constructive advice.

RAS

Do an SOA so you can spot the "latte habits."

SOA Calculator (lemonfool.co.uk)

Your credit cards have £4K debt on them? How much is their limits?

Pay off the most expensive debt first but, add an extra £5 to the payments on the other debt. Just make sure it doesn't get deducted off your next DD.

Mean-time got anything you can sell to earn the odd £100?

cliffordeone

Thank u I had the same problem