Should I be consolidating my debt and over a longer period?

Hi all, I'm in a bit of a tricky situation and was wondering if anyone could give me some advice.

Basically, a last year I needed some work doing on my house, at a cost of £10,000. Although I didn't have £10,000 available, I was in a comfortable financial situation and happy to take a £10,000 loan over a 36 month period at approx £360 per month.

Over the last few months I have been spending a little too much on various things (house, car, etc) and have amassed a £5500 credit card bill. Which I have now transferred over to a 0% interest card and am paying the min payment off each month, approx £120.

My issue is, that I am now paying £480 each month just paying off debt, which doesn't leave me with a whole lot, after I have paid my mortgage, phone contract, petrol, etc.

Do you think it would be wise, to consolidate all this debt onto one loan, paid over about 60 months, which would roughly cost £280? I know that it could cost me a bit extra in interest, and I would have essentially paid the interest on the first loan for nothing, but I am worried that if an emergency arrises, I will not have enough cash handy to deal with it and could end up in a tricker situation.

Let me know your thoughts, I would really appreciate some help as this is making me rather anxious!!

Comments

  • Hi,

    I have to ask, have addressed your overspending that led to your credit card debt? If the same problems with your monthly budget still exist, then a consolidation loan would not solve your financial situation and could in fact make it worse.
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  • JGB1955
    JGB1955 Posts: 3,445
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    How likely is it that you will qualify/can show affordability of total unsecured borrowing of £31,000? The second loan company will assume that it's new borrowing and won't be interested in the fact that you intend using the money to pay off the first loan and credit card.
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  • Hi,

    I have to ask, have addressed your overspending that led to your credit card debt? If the same problems with your monthly budget still exist, then a consolidation loan would not solve your financial situation and could in fact make it worse.

    Yes, I'm far stricter now! I have a spending spreadsheet and have banned myself from using credit card. I'm confident I can keep current spending under control.
  • JGB1955 wrote: »
    How likely is it that you will qualify/can show affordability of total unsecured borrowing of £31,000? The second loan company will assume that it's new borrowing and won't be interested in the fact that you intend using the money to pay off the first loan and credit card.

    I have a good credit rating. I'm fairly certain I will be able to borrow that much before paying the original loan off.
  • mark55man
    mark55man Posts: 7,889
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    generally the response on this board will be to try and pay off without consolidation as consolidation is normally code for "intend to pay it off but not quite get round to it and end up worse off"

    the first line of action (which you have clearly started on) is to review spending and while not using credit card is good, not spending at all is better. there is a lot of debate about whether its best to go hard core and pay everything to debt, or to pull the belt but retain some luxury. Consolidation is at the really loose end of the scale, not undoable, but definitely the long way round and lacking commitment- more of a light bulb flicker than a full on light bulb moment
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  • theoretica
    theoretica Posts: 12,246
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    If an emergency does come up in the next three years could you not consolidate then as easily as now?
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  • DCFC79
    DCFC79 Posts: 40,598
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    theoallen wrote: »
    I have a good credit rating. I'm fairly certain I will be able to borrow that much before paying the original loan off.

    Lenders dont see the rating, they use your credit history and theres 2 other agencies who may well rate you differently, not all lenders will use all 3 credit agencies, some may use a mix of the 3.

    Its a risky road the consolidation one.
    Have you cut the 0% credit card up ?
    If you end up consolidating Id consider making some extra payments along the way.
  • Do a SOA and post.
    There is probably more room to cut back.

    £5.5k is quite a lot of extra spending over a few months

    What rate is the loan?
  • mark55man
    mark55man Posts: 7,889
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    http://www.stoozing.com/calculator/soa.php

    have a look at the above - better if you share, there are some very shrewd people on here

    consider starting a debt free diary on here - lots of help - all of us been here far too long - personally because I didn't go hard core early enough - but its taken more years than it should

    Mark
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  • Consolidating usually means takes a long time to get out of debt if ever. Most people once they go down the consolidation route never get out of debt until they cannot get any more borrowing and end up paying a lot more interest. Most people have the intention of using the free income to either overpay debt or save but in reality most carry on spending more than they should which means inevitably more debt further down the line.

    You have spent £15k above your budget over a relatively short period and delaying dealing with this by consolidating could be the start of a slippery slope to even more debt.

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    Link to soa: https://www.lemonfool.co.uk/financecalculators/soa.php

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