Chances on getting a debt consolidation loan & is it a wise choice?

CheerfulIntrovert Forumite Posts: 9
First Post
Hi, I'm planning to apply for a debt consolidation loan from a credit union and would like to know my chances and if this is a wise choice. 

We moved to the UK 5 months ago from Japan and accrued quite a huge sum of initial expenses (visas, NHS surcharges, moving expenses). Currently our net income is around £3.8K monthly and our debts are as follows: 
  • £12.3K - credit card (Japan)
  • £2K - taxes (Japan)
  • £4.5K - season ticket loan from employer (UK)
As of end of July, we are currently paying roughly £900 per month into our credit card debt while £500 was deducted monthly from my salary (the net income above is after deduction) for the season ticket loan. We haven't started on paying the taxes. 

I felt that this debt could take ages to repay with the high interest rates charged by credit cards and now we have additional payments to make for our taxes (taxes for 2022 which is charged this year). 

I was thinking a debt consolidation loan of around 
£20K from a credit union (newly arrived in UK, no credit score, so application with standard banks are excluded here). Rough calculations showed that with a debt consolidation loan, I could still pay the same monthly repayment amount (£940 - assuming a loan of £20K over 24 months at 12.7%) and still have some to spare for personal savings. 

What do you think my chances are for being approved for this loan and is this a wise choice? 


  • MorningcoffeeIV
    MorningcoffeeIV Forumite Posts: 1,320
    1,000 Posts Name Dropper
    Very poor - which is a good thing, as it's a terrible choice.

    Head for the DFW boards for advice on cutting costs and managing your debt as a whole.
  • CheerfulIntrovert
    CheerfulIntrovert Forumite Posts: 9
    First Post
    MorningcoffeeIV, do you mind explaining why it's a terrible choice? 
    As based on my calculations, I will make the same repayment amounts with some amount to spare at the end of the month, in contrast to my current status where I barely have enough to save. 

    But yeah, I will head to the DFW for more advice! 
  • MorningcoffeeIV
    MorningcoffeeIV Forumite Posts: 1,320
    1,000 Posts Name Dropper
    Because it doesn't address the underlying issue and instead of increasing the amount you're paying off the debt, you're now planning to siphon money off for savings. 

    Borrowing money at 12.7% to put in a savings account is another terrible idea.
  • Caz3121
    Caz3121 Forumite Posts: 15,433
    Part of the Furniture 10,000 Posts Name Dropper

    • £4.5K - season ticket loan from employer (UK)
    assuming a loan of £20K over 24 months at 12.7%) and still have some to spare for personal savings. 

    2 things jump out...
    is the season ticket valid for one year? if so then after the 12 months you will be getting another one but still be paying for the current one for another 12 months + via the loan so in a worse position
    borrowing money @ 12.7% to have money to put into savings only is worthwhile if you can earn more than 12.7% interest on the savings...otherwise it is costing you money
  • MEM62
    MEM62 Forumite Posts: 4,513
    Tenth Anniversary 1,000 Posts Name Dropper
    MorningcoffeeIV, do you mind explaining why it's a terrible choice? 

    Debt consolidation rarely leads to a good outcome in the long term.  You cannot borrow you way out of debt.  Also, you are proposing to borrow partially for current living expenses as you will still be paying for this years season ticket when the next years is due.  Such expenses should be budgeted for from your monthly spending.  Likewise taxes.  These are not unexpected costs and money should be set aside from your earnings to settle any tax that is due on them.   

    Failing to have money set aside for known or expected expenses suggests that you have a budgeting issue rather than debt issue.  
  • enthusiasticsaver
    enthusiasticsaver Forumite, Ambassador Posts: 14,718
    Tenth Anniversary 10,000 Posts Name Dropper I've been Money Tipped!
    No it is not a good choice.  Debt consolidation loans rarely lead to lower debt overall and if you have no credit rating here and have just moved from overseas you will not get a good interest rate.  Ideally you should have saved for things like visas etc before moving over but given you are where you are then if you can afford to pay £900 per month then I suggest you continue with that but obviously the taxes situation also needs sorting out.  You may need to save more from income and cut back.  Maybe  do an soa and head over to DFW forum.  Hopefully at some point you will qualify for 0% balance transfer card and can move the credit card debt over. 

    The season ticket will be an ongoing expense so this and taxes is something you need to budget for going forward. 

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  • CheerfulIntrovert
    CheerfulIntrovert Forumite Posts: 9
    First Post
    Thanks for everyone's input & feedback! 
    I've shelved the idea of getting a debt consolidation loan & will get to reorganising my budget as well as looking into ways to supplement my income.

    I guess our problem here is we were caught by surprise with the huge amounts needed in which our savings were not sufficient to cover them all. The taxes were a different thing altogether as we have already paid our income taxes - these are residence taxes in Japan which were calculated and paid for on the 2nd half of the subsequent year (so now we're paying for year 2022 taxes). We didn't know about this calculation method as it is usually automatically deducted from our salary. So this is really an oversight on our part...  :s

    Oh, I don't think I qualify for a 0% balance transfer card. The credit card debt is on a card issued in Japan - I couldn't possibly move it to one in the UK.

    Again, thanks for everyone's feedback! 
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