Consolidating loans, to lower interest and payments

rndm1

Might be a stupid question, but I have a range of loans at varying interest rates - some very high from past (silly) financial decisions.

Separately, everything is on paper affordable, but by loan/debt profile would show that me asking to borrow the total owed amount as unaffordable which is presumably why standard comparison sites etc are rejecting me.

Even selecting "consolidation" as the option, I understand on the lenders side it's a risk if I chose to just use the money to double my debt, instead of settling everything and lowering my monthly commitments in to a single loan. I presume feasibly they can't trust and therefore lend on the provision that I settle x, y, z loans - at least not using a simple online application tool.

At a more reasonable standard interest for a single loan I could reduce my monthly repayments up to £350/month which would make a big difference.

Appreciate it's all based on credit scores etc, but is there a more tailored service that takes this type of situation in to consideration?

I've never missed payments, and on paper someone could objectively see that if I can afford to pay everything separately at a higher monthly, and have done so for years without any missed payments that the risk of consolidating down to a lower outgoing wouldn't be that high.

Thanks for the advice.

ManyWays

You have set out the risks and why a lender wont do this. Even if the lender is sure you will settle the other loans, there is also the more subtle reason that a lender may be happy to risk (inventing numbers) 4k on you but not 20k.
Your situation will improve when the first couple of loans are repaid as the other loans will also have reduced, so you may have more options at that point.

PRAISETHESUN

Consolidation is rarely a good thing. As you point out, many lenders won't lend for it as they have no guarantee you will actually use the money to pay off your existing loans and will assess you as putting yourself into double the debt. "Specialist" services such as the hypothetical service you describe don't really exist, but if they did then I suspect they wouldn't be all that great as they'd price in a high percentage of bad debt and I doubt they would offer much value over just paying off your debts separately like you already currently are.

DullGreyGuy

PRAISETHESUN said:

Consolidation is rarely a good thing.

Consolidation is often a good thing but sometimes can be difficult to achieve because lenders won't lend and does introduce the risk that if you're fundamental behaviours haven't changed that you clear your credit cards and then start spending on them again meaning you ultimately nearly double your debt. If your consolidating other loans its not as bad because its not just there in your pocket when you see ABC has just released a brand new version of your favourite thing and XYZ as a flash sale with 2.5% off.

Whilst it can be difficult to get consolidation loans its certainly not impossible for everyone and some do have the headroom to pass affordability tests with them holding both debts but still want to get rid of prior lending at unfavourable rates. 

CliveOfIndia

DullGreyGuy said:

PRAISETHESUN said:

Consolidation is rarely a good thing.

Consolidation is often a good thing .......

Exactly this, everything you've said is spot on.

Taking out a loan to consolidate credit cards is generally advised against, since the temptation to start spending on the cards again can be too great for some.  Consolidating higher-interest loans into a lower-rate loan can be a good idea, as long as you have the discipline to actually use it to clear the other loans.

But the major stumbling block - as noted by both the OP and others - is simply that no lender can guarantee you actually would use the new loan to repay the others.  And they have to factor this into their affordability checks (or else potentially face claims of irresponsible lending).

rndm1

Yes, I figured I pretty much had the situation sussed. I certainly did not consider the irresponsible lending side of things from an FCA perspective. I did wonder if a conversation with my bank might be worth a try, but again they're bound by the same rules...

Whilst I think I'd be able to demonstrate a change in behaviour from my silly, less educated days of the past, and affordability is obviously not an issue - it does feel like there's a point considering the facts, and in the spirit of helping people out of debt etc where the context of the individual situation are weighted against the risk and not solely on an affordability calculation snapshot. I guess ultimately though, that's great for me at one end of that sliding scale, but then others who would just lie there way through to borrow more and claim irresponsible lending...

A comparison to draw on is with car finance, "We will settle your existing finance for you, or watch you do it in front of us" type situation as a condition for the next agreement. There's nuance obviously with the balances going to corporations, rather than the individual - and you're obviously receiving the asset you said you wanted that finance for, but yeh...

BrotherUuurgh

It really sucks being on this side of the fence doesn't it. If it helps, my own recent endeavours have found having a (free) account with a credit reference agency/broker very useful. It's been very helpful over the last few months in getting my finances in better shape. Got a good balance transfer card with more credit than I needed and more recently managed to consolidate two loans into one at a lower rate. Used to be paying 30.9% % 47.9% on the cards. 34.9% & 48.9% on the loans - now paying 0% on the card and 29.9% on the loan. It's a good step in the right direction. Usually there's an arrangement fee on the loan as well but there wasn't for this particular one, so overall saving good money plus lower monthly contractual repayments. It could be due to increasing my debt repayments and lower overall credit utilisation from the BT card, that I had some better luck with the credit agency/broker. 

I remember feeling frustrated the same as you - just can't seem to find anywhere that will lend to you, despite knowing in your heart of hearts that you will behave with the new loan. You've just got to keep at it making extra payments and bringing balances down, tough as it is. You could also link accounts to the credit agency - the more info they have, the better your chances. If you haven't already I'd recommend trying out Clearscore. Make overpayments if you can, link your accounts to give them an idea of your "borrowing power", and maybe try a soft check each month to see what loans they might be able to find you.

A bit of spiel but hopefully helps. Needless to say, if you do manage to consolidate, make sure you are sensible going forward. All the best.