Debt consolidation loan

lightwood345

I am debating whether to take out a debt consolidation loan as there are mixed reviews. I have 2 personal loans 
1- £1790 
2- £1200 

credit card 1 - 
£1100 
credit card 2 
-£850 
credit card 3 
- £500 

a lot of my interest free plans are up soon. 

Would it be good to get a debt consolidation loan or just attempt to pay what I can

fatbelly

What are the aprs on the existing loans?

And what is the apr on the proposed one?

You should be able to balance transfer the credit cards on to new 0% deals but this may be easier before the new loan appears on your file.

Grumpelstiltskin

OK As long as you realize that the first debt consolidation loan is the top of a very slippery slope for many people.

If and it may be a big if, you can get the loan can you guarantee to close all three of the credit cards and pay off the loans?

Remember the company you are looking to get the loan from don't know you will pay all your debts off to them it just looks like you are getting further into debt and that may be a big red flag to them.

If you are having problems with your debts go over to the Debt Free Wannabe board for help.

EssexHebridean

Have you checked what 0% balance transfers you may be eligible for? if you can get any then there is little point in signing up to start paying interest where you otherwise would not need to - that just costs you most money. 

Is your plan if you did get this loan to then pay every single spare penny you can to it in order to clear it up?

At the same time, have you now got a robust budget which includes saving an emergency fund, and setting aside money monthly to cover all the annual spends - Christmas, other presents, holidays, insurances...that sort of thing? 

If the answer to any of those questions above is No, then the DFW board should probably be your next stop.

Remember - you can't borrow your way out of debt. 

MEM62

lightwood345 said:

I am debating whether to take out a debt consolidation loan as there are mixed reviews.

There are not too many mixed views.  The majority view is that consolidation loans do not work - and in a lot of cases they do not.  If you have the headroom in affordability, the interest rate will likely be be higher.  Also, many will feel financial relief after consolidating as they feel they have cleared a debt when they haven't - they have just moved it.   This might then encourage further spending as a result of this relief.  And finally, it does not encourage the individual to address the cause of the problem - why they accumulated the debt in the first place - and change their behavior.      

Superhoopza

This answer of "no, consolidation loans are bad" is really frustrating. It is down to the individual's circumstances, i.e. would they gain financially from the consolidation loan (lower APR etc) or are they getting it with a view of just getting further credit lines that they are likely to spend on. It's also quite patronising to the individual to presume what their future behaviour will be without context of how they got into the situation they are in. 

Personally I think in response to the OPs question, people can give the pros and cons of a consolidation loan but if they want to start giving individual judgements, they need to delve a lot more into the context of the individual but also be open to them making up their own mind. 

Lots of good advice also on this thread about trying to address the issue of being in debt and some guidance on where there is support on here for them. 

EssexHebridean

Not sure which response you are referring to with your quoted text Superhoopza as nobody has said that on this thread? (Unless a response has been deleted since you made your post, perhaps?) 

The reason why many folk here who have been active here for a long while are generally negative about consolidation is in part due to experience - the majority of folk we see here who are considering consolidation have either been that route in the past (a question often asked on DFW is “are any of your other current loans the result of consolidating previously?” and all too often the response to that is yes) or have seen the ads promising wonderful things from consolidation without realising that it will cost them more, and indeed that in many - possibly even the majority of - cases it’s not even needed. Frequently relatively minor lifestyle choices can offer sufficient surplus to make a different approach better, and cheaper. 

Consolidation can work - for someone with high APR debt for example, who can get the lot onto a cheaper interest rate, takes out a new loan for a shorter period or at least not substantially longer, and works hard to get it cleared ASAP - it can be a more economical way of clearing debt - so long as they also have a robust budget that not only covers their regular financial needs but also enables them to set aside money for an emergency fund. That last bit is crucial as without that, the temptation will be to reach for credit again as soon as something occurs that cannot be afforded otherwise! 

This is a money saving site - and so the effort is usually pointed towards offering money saving solutions. It would be remiss of those offering support here to routinely suggest solutions which will in fact cost an OP more either in the short or long term. This board is also not the ideal place to discuss things like this - for someone in the sort of debt that makes a consolidation loan attractive DFW is the right place really, on and there more in depth questions are usually asked to get to the root of the issue. Think of it a bit like the difference between a casual but public conversation in a pub - which might be more general, and more private chat in someone’s front room - where more probing questions are appropriate! 

fatbelly

My post was to ask for further information and point out that no loan is likely to rival the 0% that you can get on credit cards for a small fee.

Unfortunately no response to that so far

retiredbanker1

My 2p worth - Consolidating changes your mind step about debt - a loan makes you think we have solved the problem we are paying less each month meaning we have more money to spend etc - So you start thinking things like we can afford a holiday next year or let's change the car etc etc and before you think about you will be back on here because you will be in more debt. For most people this is how it pans out - they were my favourite type of customer because I knew they would be back year after year!

Superhoopza

EssexHebridean said:

Not sure which response you are referring to with your quoted text Superhoopza as nobody has said that on this thread? (Unless a response has been deleted since you made your post, perhaps?) 

The post above mine, all negative views without highlighting one positive.

The reason why many folk here who have been active here for a long while are generally negative about consolidation is in part due to experience - the majority of folk we see here who are considering consolidation have either been that route in the past (a question often asked on DFW is “are any of your other current loans the result of consolidating previously?” and all too often the response to that is yes) or have seen the ads promising wonderful things from consolidation without realising that it will cost them more, and indeed that in many - possibly even the majority of - cases it’s not even needed. Frequently relatively minor lifestyle choices can offer sufficient surplus to make a different approach better, and cheaper. 

I refer to my post where I say yes people just highlight as well as the cons, but also the pros of a consolidation loan. Most of the posts on here where asking important questions for the OP to consider prior to taking the consolidation loan and rightfully so.

Consolidation can work - for someone with high APR debt for example, who can get the lot onto a cheaper interest rate, takes out a new loan for a shorter period or at least not substantially longer, and works hard to get it cleared ASAP - it can be a more economical way of clearing debt - so long as they also have a robust budget that not only covers their regular financial needs but also enables them to set aside money for an emergency fund. That last bit is crucial as without that, the temptation will be to reach for credit again as soon as something occurs that cannot be afforded otherwise! 

Absolutely agree with all this

This is a money saving site - and so the effort is usually pointed towards offering money saving solutions. It would be remiss of those offering support here to routinely suggest solutions which will in fact cost an OP more either in the short or long term. This board is also not the ideal place to discuss things like this - for someone in the sort of debt that makes a consolidation loan attractive DFW is the right place really, on and there more in depth questions are usually asked to get to the root of the issue. Think of it a bit like the difference between a casual but public conversation in a pub - which might be more general, and more private chat in someone’s front room - where more probing questions are appropriate! 

I'm not saying anyone should suggest anything positively or negatively in regards debt solutions, especially those that cost more money. I also think people, without context, should not dismiss ideas or also not give the OPs, once fuelled with the information, respect that they will undertake what they need to with any debt solution, in this case a consolidation loan. Those presuming an OP will just waste it and get into more debt, without prior context, are one could say judgemental, others could say patronising. Highlight the benefits and disadvantages like you and others have done and then let the OP make a judgement themselves.

Comments in bold.

Superhoopza

fatbelly said:

My post was to ask for further information and point out that no loan is likely to rival the 0% that you can get on credit cards for a small fee.

Unfortunately no response to that so far

yeah nothing wrong with your post, it was helpful and fact finding, free from judgement.