Would I be better off with one loan

missstropy

Good morning peeps,

Just wanted this to be my first stop for some advice from anyone before I go headlong and do something I might regret later.

I have roughly £13,000 on 4 credit cards. At the moment I am just managing to pay just over the minimum payments but there coming through at one a week leaving me hardly anything from week to week to live on. Would I be better off consolidating them and paying it off over the next 7years at a regular payment each month. One card (Halifax) 12 month interest free has just expired and the interest alone on that one next month is £72.00, or sticking to paying what I can each month and budgeting even more for food and utilities.

I was offered a loan by Natwest for consolidation a couple of months ago but turned it down, and the bank said if I needed to I could pop in to discuss it with them. My debt since then has gone up considerably. And Im starting to panic a bit about my outgoings.

rog2

Consolidation loans are rarely a good idea. They may look attractive, in that you pay less per month, but look at the long term picture and you wil, usually, find that you end up paying a great deal more, in interests and charges.
Also, with a consolidation loan, there is always the temptation to use the 'credit' that the 'loan' frees up, creating a classic 'debt spiral' until the payments become totally unmanageable.
Personally, I would look at your existing payments and see if there are ways of reducing them.

lilac_lady

Only take a consolidation loan from a reputable lender if you decide to have one. I wouldn't advise you take out one unless you've cut up all your credit cards first.

IWantToBeFree_2

They work for some people, but not for others.

I took out a consolidation loan, paid off all my cards, and then a few months later took out another loan to pay off the cards again as I had not stopped spending.... And now, I have £5k on credit cards despite 2 consolidation loans, certainly didn't work for me!

My OH took out a consolidation loan as he was paying £200 interest a month on a CC balance so despite making a £300 payment a month he was not getting anywhere with the balance. In his case, its worked out well, we now pay £275 a month on the loan, which has no early redeption fee's and only £100 of this is on interest so the balance is reducing much quicker than his CC would have done.

I think the main thing is that you have to address the source of the problem, and if that is that you simply spend too much, you need to figure out how to cut back, no point in getting a consolidation loan if you are just going to carry on spending just as much as you were prior to obtaining it.

missstropy

I was planning on cancelling all but one of the cards (for desperate emergencies only). I am usually pretty good with my money. And I would not want to have this much debt ever again or this many cards.

I was thinking it would be better to have it all in one place and concentrate on that rather than bits going on cards all over.

Thankyou all for your advice.

IWantToBeFree_2

If you have the disapline to do that, then it may work.

What you should do is look at the whatsthecost website, and put in your balances, the APRs and how much you pay monthly to show that if you only pay the minimum on the cards, how long it would take you to pay them off and how much interest you would pay.

If you then do the same with the loan, and compare the two, and see which gives you the lowest interest. Maybe also go with a loan where you can overpay and have low early repayment fee's incase you find yourself in a position where you can pay it off early.

Have you looked at your budget as a whole and identified where you can cut back to ease the problems of not having much spare after the repayments have been made?

LilDevil

missstropy wrote: »

I was planning on cancelling all but one of the cards (for desperate emergencies only).

If you do keep a card for emergencies, is there someone trustworthy you can give it to for safekeeping - I gave my sister one of my cards :A and she would not let me have it for anything other than emergencies - I had to explain exactly what I wanted it for and everything This card has since been cut up!