Please help, should I consolidate?

L-M

Hello:hello:

I was just wondering if any of you lovely people could give me a little advice?

I currently have a natwest loan for £6100 (it was originally £7000) with 3 years left on it. Natwest have offered me a loan to consolidate this with my over-draft (£3000) and an egg credit card (£2000).

At the moment I am very tempted to do this as I would be a least £50 better off a month due to the high interest on the egg card and overdraft.

The down side is that I would have the loan for 5 years (although I already have to pay the original one for another 3 years)

I would love to just pay off the over-draft and egg card but it would take me so long and as I said I am paying so much in interest which isn't 'doing' anything!

Would it be a good idea to consolidate or a bad one?

Thanks for reading

xx

poorandindenial

Hi L-M

99% of the time consolidation is BAD, BAD, BAD (the 1% probably have iron willpower or don't really exist)

The reason why is that in theory it is a great idea, just one payment to remember, things look and feel more in order, lower payment per month. The reality is that you often pay over a longer period so you pay more and more importantly you are almost guaranteed to rack up more debt on your existing card and overdraft and then want to consolidate again and again.

Look at my signature, 5 years ago I consolidated at £12k, I told myself that I wouldn't use the card again, that I would stay out of my overdraft etc etc - now look at it!!!

msmicawber

Hi L-M,

I think it would be useful if you would list all the APRs on the loans including the consolidation loan to see whether it really would benefit you - would you really be paying less interest, or paying more interest, but over a longer period? Also, you need to be sure that you wouldn't run up other debts once you felt the heat was off.

L-M

Thank you both so much for replying

Yes I know exactly what you mean about racking the debt back up again, if I did go ahead I think the only way it would work would be to cancel my overdraft and credit card so I couldn't be tempted to use them?

The apr for the loan is 7.2%
I'm not entirely sure what the apr on the over-draft is but I'm paying around £40-£50 a month in interest
The egg card apr is 16%

It' a good point that would I actually be paying less interest or more over a longer time.....definately something to think about there!

I guess I was just thinking that if I can't pay the two things off then I will be paying the loan and the interest on them for a long time without actually getting anywhere, does that make sense?

Thank you again for your help, I am so confused about this that I really value any input

xx

msmicawber

I'm cynical, L-M, so I expect that any offer from a financial institution will be for their benefit, not yours. Get your paperwork for the various loans and have a look at this site: https://www.whatsthecost.com and you can tinker around with the various interest rates and see exactly what you would be paying. That should make it more obvious how to go forward. If not, post the details on here and people will explain for you.

poorandindenial

That makes perfect sense. How is your credit rating looking?? If it is good then a 0% option for the card would save you even more interest for the life of the 0% offer(you could try for a Mint card or one of the others)

Your overdraft sounds very expensive (mine is £500 and normally costs £2-3 per month) and it may well be worth dealing with the bank so that they roll that into the loan and take away your overdraft facility in one go.

Burlesque_Babe

I would echo msmicawber - use whats the cost to see how much more quickly you could pay it off without consolidating. Remember - when you consolidate you are paying interest on the interest already incurred on the loan and the egg card.

I've been there more than once and it's a slippery slope.

If you pop up your SOA (see the sticky) we could have alook to see if ther is any way you can pay off the CC etc without consolidating. There's every possibility with some careful juggling that you could pay everything off even quicker than you are planning to without the consolidation loan.

bountiful

Hi - I joined this forum last week and have read loads of stuff on here etc. Because of the advice given I was aware of the consolidation loan trap. I went to the Alliance & Leicester a couple of days ago to open a current account offering a 0% overdraft to match my existing one (ie transfer my overdraft to a 0% account). The lady was very nice - but she offered me (tried to get me to buy?) in this order: a loan of £10,000 to consolidate all my debts - fixed payments over 5 years (first with full protection, then maybe with single life protection); then a 0% credit card with them (which sounds OK but was not what I went for); then a special enhanced current account where you pay £10 a month for things like health insurance; before finally settling down to offer me what I went in for - a current account which would give me an overdraft at 0%.
Oh yes, they have an agenda - and they're there to make money out of us. Check out all the advice offered from the experiences folk here and be clear about what you want to achieve.
All the best!