Consolidating debts

sf10592

Looking for advice before signing up for a personal loan to consolidate debts.

Currently have 20k in debts on various 0% credit cards. Paying the minimum payment every month £350. All of the cards lose the 0% promotion period at some point this year so will have to switch them all which will of course come with a fee of approximately 3.5% or more.

I looked into a personal loan of 20k and monthly payments would be £464 with a 5.6% APR and I will be debt free in 4 years. I was pretty much set to sign up until I read some threads saying not to use a personal loan.

For me it seemed like the best option as it is easier to keep on top of with 1 monthly payment without having to worry about continually switching to different cards. Please let me know your thoughts on my situation and any advice you may have.

Thanks!

Ayr_Rage

If you can be disciplined and not live on further credit it could be a reasonable option.

Altior

https://forums.moneysavingexpert.com/discussion/6654840/consolidating-debts

What's your cash position currently, and how much can you afford to pay the debt off each month?

LzzyIsGod

Whilst I have not been on these boards particularly long, i have been round the debt cycle a good few times in my adult life. There will be more qualified posters who can advise you better than I but in my experience:

The issue I always had when i consolidated in the past (and is similar to other posters experience reading here) is that once I cleared and consolidated one load of debt I thought "phew, problem sorted" and I didn't actually address the reason of why I had ended up in debt in the first place. And all that happened was I relaxed and went on to rack up even more debt and built a bigger hole. And because i changed nothing behaviour wise, on and on the cycle/spiral went until one day the proverbial hit the fan.

In my experience the buildest power you hold in getting out of debt is a realistic plan and budget (other more experienced posters will give you a link for a SOA which is invaluable as a starting point). If you team that up with consistent behaviour change in sticking with it (a budget is no good if you dont follow it!!) then you can start to see light at the end of the tunnel.

The things I learnt along the way by NOT consolidating are what I'm hoping will keep me out of debt in the future.

Good luck

sf10592

https://forums.moneysavingexpert.com/discussion/comment/81879906#Comment_81879906

I could afford to make the £464 payment every month by making some changes in my spending.

sf10592

https://forums.moneysavingexpert.com/discussion/comment/81879911#Comment_81879911

My worry with not consolidating is having to try and switch them all to 0% cards and being rejected. I obviously have a large amount of debt left to pay off and if i was to lose the 0% and go to the standard interest rates it would make my situation totally unmanageable.

Altior

https://forums.moneysavingexpert.com/discussion/comment/81879936#Comment_81879936

Quite tight then, and no surplus cash savings?

For me you have much more flexibility with cards to alter the payments.

Personally I would carry on with the cards, and if you can afford £120 a month, start a regular saver and build up some cash reserves. Doing that means you can beat the hypothetical loan interest with your savings. With a view to increasing the regular saving as your liabilities reduce. Eventually you'll have more savings than liabilities ;)

fatbelly

5.6% is not a bad apr

The big mistake would be to consolidate using a secured loan.

As this is a personal loan you could go for it. Just make sure that with a credit card (i assume you'll leave one or two open) you pay off the balance in full each month

If it becomes unaffordable then you default and offer to pay what you can afford

EssexHebridean

Are you absolutely clear on what has lead to you accruing the debts in the first place, has whatever caused the situation now been sorted, and do you now have a functioning, solid budget that you stick to? Are you still using credit at all - other than a CC for routine spending that you pay off fully each month?

Claddagh_Noir

There is nothing wrong with taking out a consolidation loan. As long as you are disciplined enough to close the credit card accounts and pay off the debt with the loan.

sourcrates

https://forums.moneysavingexpert.com/discussion/comment/81880404#Comment_81880404

But unfortunately most don`t do that, and the cycle continues unabated.

Its sometimes better all round to default and enter a debt solution than to continue borrowing more money to plug the holes with.