Consolidation Loan - yes or no?

RAS

Regarding "savings" and vet's bills, I suppose what I'm saying is that you know that you will need to pay vet's bills as well as electricity bills over the year. You've a rough idea how much that might be annually and you need to budget to put aside one twelfth each. Which isn't quite the same as saving really. And the fact that you had some money towards the recent cost means it's working.

Of rather more concern is that I think we all assumed that you were funding your living costs and had enough spare to cover the minimum payments? It appears not. That leads you more into DMP territory, but it also depends on how long your partner is happy to subsidise you?

One slightly random query.

Could you post a list of your cards, their APRs, credit limits and current debt? No need for names, card 1,2 is fine.

Regarding the card you are paying off, I'd suggest halving the credit limit. So still some unutilised credit, but less credit in total than previously. 

VioletNewStart

RAS said:

Regarding "savings" and vet's bills, I suppose what I'm saying is that you know that you will need to pay vet's bills as well as electricity bills over the year. You've a rough idea how much that might be annually and you need to budget to put aside one twelfth each. Which isn't quite the same as saving really. And the fact that you had some money towards the recent cost means it's working.

Of rather more concern is that I think we all assumed that you were funding your living costs and had enough spare to cover the minimum payments? It appears not. That leads you more into DMP territory, but it also depends on how long your partner is happy to subsidise you?

One slightly random query.

Could you post a list of your cards, their APRs, credit limits and current debt? No need for names, card 1,2 is fine.

Regarding the card you are paying off, I'd suggest halving the credit limit. So still some unutilised credit, but less credit in total than previously. 

Thank you. I really want to avoid a DMP.

My partner and I have always had an arrangement over who pays which outgoings. I pay some and he pays others. Its worked up until now. I’m on a salary so my wages are fixed. He is freelance and usually earns a bit more than I do.

But this year has been tricky as my credit card interests have escalated and he has had less work than usual. And he’s ended up having to pay some of the costs I usually pay.

His work is starting to pick up again now. But I considered the loan to just give me a bit more each month to help with the expenditure and so I can go back to covering everything i used to. But having read the replies I get that maybe it’s not the best idea so I will keep going best as I can with the CCs and try and cut corners elsewhere.

And I posted my card details on my own diary as I thought it would be a better place for it. I don’t know how to link to it but it’s under my name.

RAS

Thanks, had a look.

Without doing a full calculation, it's clear that a debt shuffle could reduce the amount of interest you pay. This won't reduce the amount you owe but would actually clear you most expensive card. Unfortunately nearly all you cards have relatively high rates so you're only going to cut say 10% but over time that makes a huge difference.

I'm assuming that you can't buy anything on the 0% cards.

Look at the three cards immediately above them. In all three cases your current debt is £400-£500 less than the card limit.

This requires extreme discipline and you may need your OH's help to sort this out as plainly you can only do this if you are paying things that are not on DD, so you may need to pay some bills they normally pick up, and vice versa. And you may need to do it over a couple of months.

Take card 9. You owe £400 less than the limit. Don't go absolutely to the limit, keep a bit below, but over the next month, pay for £400 of goods and services using card 9 that would have been bought anyway.

Then immediately pay £400 off card 1 from your bank account. 

You've spent no more than you would have on goods and services, as a couple. You'll probably need to rebalance your financial responsibilities as a couple to do this.

Meanwhile you've effectively transferred £400 worth of debt from 34% to a 19% card even though the amount you owe hasn't reduced. 

You've got enough spare capacity in cards 7-9 to transfer almost all the remains of card 1. Then you can look at card 2, but moving that down to lower interest rate cards will take time. 

EssexHebridean

VioletNewStart said:

RAS said:

Regarding "savings" and vet's bills, I suppose what I'm saying is that you know that you will need to pay vet's bills as well as electricity bills over the year. You've a rough idea how much that might be annually and you need to budget to put aside one twelfth each. Which isn't quite the same as saving really. And the fact that you had some money towards the recent cost means it's working.

Of rather more concern is that I think we all assumed that you were funding your living costs and had enough spare to cover the minimum payments? It appears not. That leads you more into DMP territory, but it also depends on how long your partner is happy to subsidise you?

One slightly random query.

Could you post a list of your cards, their APRs, credit limits and current debt? No need for names, card 1,2 is fine.

Regarding the card you are paying off, I'd suggest halving the credit limit. So still some unutilised credit, but less credit in total than previously. 

Thank you. I really want to avoid a DMP.

Why? It may be that you have a perfectly solid reason - that you work in an environment where it would have to be declared, for example. Often though people have some incorrect ideas and assumptions about DMPs, so it would be good to check your reasoning here. 

VioletNewStart

RAS said:

Thanks, had a look.

Without doing a full calculation, it's clear that a debt shuffle could reduce the amount of interest you pay. This won't reduce the amount you owe but would actually clear you most expensive card. Unfortunately nearly all you cards have relatively high rates so you're only going to cut say 10% but over time that makes a huge difference.

I'm assuming that you can't buy anything on the 0% cards.

Look at the three cards immediately above them. In all three cases your current debt is £400-£500 less than the card limit.

This requires extreme discipline and you may need your OH's help to sort this out as plainly you can only do this if you are paying things that are not on DD, so you may need to pay some bills they normally pick up, and vice versa. And you may need to do it over a couple of months.

Take card 9. You owe £400 less than the limit. Don't go absolutely to the limit, keep a bit below, but over the next month, pay for £400 of goods and services using card 9 that would have been bought anyway.

Then immediately pay £400 off card 1 from your bank account. 

You've spent no more than you would have on goods and services, as a couple. You'll probably need to rebalance your financial responsibilities as a couple to do this.

Meanwhile you've effectively transferred £400 worth of debt from 34% to a 19% card even though the amount you owe hasn't reduced. 

You've got enough spare capacity in cards 7-9 to transfer almost all the remains of card 1. Then you can look at card 2, but moving that down to lower interest rate cards will take time. 

Ah yes, this is a great idea, thank you. I’ve been doing regular balance transfers onto the lower rate cards where I can but that’s usually only at 90 or 95% and some of them won’t allow balance transfers onto them.

But I hadn’t thought about spending on the lower limit cards and then paying the equivalent amount off the higher rate card. Thats a great idea. I’ve been so fixated on not using the cards that I didn’t think of that as an option. Thank you. This will work well as my partner tends to cover more of the DDs whereas I tend to cover more of the non DD costs. 

RAS

Good, it requires a lot of discipline but you can make a major impact in a couple of months. Just don't get tempted to buy more to shift more, so increasing your debt.

Down the line even shifting the last of the 34% to 29% will be worth it.

And it's likely to open up opportunities for 0% cards once your average rate drops, using the soft checker on MSE. Just watch the reversion rates through.

And every 3 months check in case you can shuffle another £100 to a lower rate card. 

birdsfoottrefoil

No! My little sisters husband did this 5 ish years ago…. Then borrowed again and ended up with a consolidation loan against their flat with an astronomical interest. That was meant to be it and his lesson learned, as they can’t move house and it’s affected their joint ability to get a better mortgage. He then stopped working full time during Covid (to support the 3 kids), she worked more to cover for him. It’s all come to a head as it turns out he’s stopped paying other things and got a CCJ. The consolidation loan is still attached to the flat 4 years later and he’s now got a CCJ, so it’ll be another 6 years till their situation improves. 

Bit of a misery story but it hasn’t sorted his problems and has just lead to them impacting his whole family. 

Combenew

I've often wondered why consolidation loans are frowned upon but doing a balance transfer isn't. Surely the danger of running up the empty card again is just as possible either way

EssexHebridean

Usually with a balance transfer the advice is likely to be to also close the card you have transferred from if the entire balance is being transferred. Psychologically there also seems to be a difference between a (usually) single debt moved from one place to another (so 1 debt = 1 debt) rather than  many debts being transferred to a single place. We have often heard of people who have said that having the many debts apparently gone felt like a relief, and as though they had "cleared most of their debt" which of course simply isn't the case.  Think about it like your kitchen cupboards - over time, you have stocked up on masses of packets and tins, and now there is no more room and each time you make dinner, you have to didge being hit by beans, tomatoes and pasta. You decide to move just the tomatoes to another cupboard - so now things aren't falling out of the cupboards at you, but you can still see them each time you open a door0 This acts as a reminder to you to not buy more beans, pasta etc until you have cleared out what you have. Your friend next door meanwhile has cleared HER cupboards out into the garage - wow, it's like she has a whole new kitchen, so much SPACE! However, in the space of just a few months, she's refilled the cupboards again and the stuff in the garage is still there, just slightly reduced, as because it is out of sight, she tends to forget its there and buy more stuff when she goes to the shops. 

Superhoopza

Combenew said:

I've often wondered why consolidation loans are frowned upon but doing a balance transfer isn't. Surely the danger of running up the empty card again is just as possible either way

That's such a good point.