In debt with a bad credit history seeking a consolidating loan

andyeyeam

This post is about getting a loan when you have a bad credit record.

My daughter has got herself into debt (circa 5K GBP). Mostly a credit card but also Klarna and Council tax. This has been due to the impact of having to supplement an income adversely impacted by poor mental health. She works for the NHS who have been a supporting employer but understandably withdraw full payment when absences persist. Her credit rating is "very poor". I suspect a good way forward is to get a consolidating loan spread over 5 or 10 years but how could she do that given her poor track record? She is still employed and we seek to improve her state of mind so she can become more reliable. My ask here is how does she go about getting a loan? 

Emmia

This isn't the answer you want to hear, but a consolidating loan rarely works if the cause of the debt is unaddressed. Consolidating in this way will cause the debt to jump pretty quickly from £5k to £10k as spending will undoubtedly continue on the credit cards, Klarna etc., and she'll still have the loan to deal with.

She needs to tackle mental health reasons for her absences from work (are these also at the root of the spending causing a lot of the debt?) as however understanding the NHS is, their patience is not unlimited so she could find herself out of work. Is she seeking or receiving treatment? 

fatbelly

Although there may be some logic in moving priority debt to nonpriority debt, you should note that council tax arrears do not attract interest whereas a loan to someone with poor credit history certainly would.

In the first instance she should see if the council will agree to a payment schedule. At this time of year it may be possible to spread it to March 2026, incorporating the new 2025/26 payments. If they want a liability order on the present arrears then that is only a small extra cost and does not appear on a credit file.

As for the nonpriority debts it is best to go to debt-free wannabe and they will ask for a statement of affairs to give best advice.

andyeyeam

Emmia said:

A consolidating loan rarely works of the cause of the debt is unaddressed, what it is likely to cause is for the debt to jump from £5k to £10k as spending will undoubtedly continue on the credit cards.

I accept this point and the cause of the debt is something also to be addressed with higher priority than the debt itself. I thought I would use this forum to seek advice on a strategy for addressing the debt and more appropriate sites for addressing the underlying cause which is mental health related.

Emmia

andyeyeam said:

Emmia said:

A consolidating loan rarely works of the cause of the debt is unaddressed, what it is likely to cause is for the debt to jump from £5k to £10k as spending will undoubtedly continue on the credit cards.

I accept this point and the cause of the debt is something also to be addressed with higher priority than the debt itself. I thought I would use this forum to seek advice on a strategy for addressing the debt and more appropriate sites for addressing the underlying cause which is mental health related.

I would as @fatbelly suggests head over to the debt free wannabe board. Ideally, your daughter should post on the board herself, as she is the one who has caused, and needs to repay/deal with the debt. 

GDB2222

I don’t know your daughter’s circumstances, but one alternative to at least consider is bankruptcy. It frees her from the £5000 debts, which may be a relief and reduce her stress. It also makes it harder to run up debts in future. 

If she can’t make ends meet because of insufficient income, I don’t see how consolidating the debt helps in the long run. 

MEM62

andyeyeam said:

I suspect a good way forward is to get a consolidating loan spread over 5 or 10 years but how could she do that given her poor track record? 

With respect, you suspect wrong.  You cannot borrow your way out of debt.  Firstly, she needs to address her expenses so that she is living within her means.  Priority debts come first - anything like credit cards and other unsecured debt can be paid, if there is any spare cash to do.  You daughter really needs to take some advice on debt management - plenty of which is available on the Debt Free Wannabe board. 

GDB2222 said:

I don’t know your daughter’s circumstances, but one alternative to at least consider is bankruptcy. It frees her from the £5000 debts, which may be a relief and reduce her stress. It also makes it harder to run up debts in future. 

If she can’t make ends meet because of insufficient income, I don’t see how consolidating the debt helps in the long run. 

A bit of a nuclear solution to, what is in the greater scheme of things, a relatively small amount of debt.     

retiredbanker1

If you (and it is a massive if) get a loan over 10 years what will you do this and next Christmas etc, Mechanical breakdown of white goods, Car servicing costs (will it last 10 years?) Holidays,,Boiler replacements, etc etc etc.
Are you also trying to tell us that you will not apply for any new credit for the next 10 years?

You can see that a consolidation loan rarely works, certainly a long term loan over 10 years will never work.