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Original poster

would you ever consolidate your loans/credit cards with one loan?

18 replies

ThatVikRinA22 · 26/07/2012 15:19

or is this just asking for trouble?

i have just had a horrible shock to find out i am paying 477 pounds a month on debt. having said that, i pay 2 loans, one of which finishes in 6 months and the other in a year - those 2 alone will leave me 365 pounds a month better off.

i am managing my debt fine and not running up any more now that i work full time, but its a pinch each month and we cant afford to do anything at the moment - no holidays or anything like that until they are gone.

that said, we need to replace the garage (its asbestos and falling down) and sort the garden ready to get the house on the market.....that will cost around 5k and will probably have to be financed by another loan at some stage within the next year.

would you just stay as you are, chipping away at the bits of debt until the loans are gone, or would you consider taking out a large loan over just a couple of years and hit the lot in one fell swoop?

advise please.....

OP posts:

Original poster

ThatVikRinA22 · 26/07/2012 15:22

btw - i pay the loans, then i have a couple of credit cards that im chipping away at and an overdraft that isnt going anywhere fast.....not until i get the other stuff sorted.....it all adds up to 477 a month roughly.

OP posts:

ClaireRacing · 26/07/2012 15:25

Loans often have penalty clauses on for settling early. You can phone them up and ask for a settlement figure.

Can you put the garage repairs onto your mortgage?

Original poster

ThatVikRinA22 · 26/07/2012 15:27

i could put the garage repairs on the mortgage but i dont want to as we want to sell the house soon and not put anymore on the mortgage or we wont have enough of a deposit to move. the mortgage is just starting to go down a bit to where we could feasibly move house with some equity!

OP posts:

booksandchoc · 26/07/2012 15:28

I got a loan to consolidate all credit card debt and overdraft. We were managing all the payments but it just wasn't going anywhere. Now we pay about the same to the loan but we know in 4 years it will paid off.

CogitoErgoSometimes · 26/07/2012 15:45

The big risk with consolidation loans is that you take one out, clear off the debts etc. but then find that the new payment leaves you short and you have to go into overdraft and CC to keep pace with day-to-day expenses. If you're 100% confident that you could manage the budget then work out exactly what you owe, exactly how much you have each month spare (£450?) and take out a loan that is as short-term as possible with monthly payments of that amount. Cut up the cards, cancel the o/d etc.

Add any home improvement costs to the mortgage and spend anything you've got saved up for a deposit on your debts.

Original poster

ThatVikRinA22 · 26/07/2012 17:19

yes thats true cognito, but really dont want to up my mortgage at all, just want rid of the debt as quickly as possible.

will have a think. cheers.

OP posts:

CogitoErgoSometimes · 27/07/2012 07:58

Then use your deposit money.

Original poster

ThatVikRinA22 · 27/07/2012 12:06

if i use the money i have for the deposit, i wont have a deposit.....and i need to move.

OP posts:

Rockchick1984 · 27/07/2012 13:00

If you repay them using your savings, you can rebuild the savings without paying out all the interest. Keep putting the money away that you were using for the debts, you may even make a small amount of interest on it. And remember, the debts may affect your ability to increase the mortgage!

CogitoErgOlympics · 27/07/2012 13:18

My thoughts exactly. If you have overdrafts, CCs and loans outstanding, that will be taken into account when you want to move. Lenders are getting quite fussy these days and checking up on background finances more than they used to for obvious reasons.

Viviennemary · 28/07/2012 19:12

I wouldn't go with one of these agencies because they charge commission for consolidation of loans. I heard the Citizen's Advice Bureau has some advice on this and it might be worth giving them a ring.

upanddown83 · 01/08/2012 18:15

my friend decided to do this and consolidated her debts and one monthly payment worked well for her for about a year then she started using her credit cards and storecards again and was back to square one again in no time so just remember if you are going to consolidate to cut up/have lots of self control to not go into debt again

mercibucket · 01/08/2012 18:25

I would sit down, do the sums and choose the option that involved the smallest overall repayment cost ie which had the lowest interest rate. That could be the mortgage, if you can promise yourself you will keep paying the same off that as you currently pay towards the loan. It's not just the interest rate but also the amount of time the loan is repayable over. Those online mortgage calculator tools will tell you the repayment cost by rate and term so you can compare loans.
I would also check any early repayment charges and check what the loans were secured against. You don't want to lose the house if you might not be able to afford the repayments

mercibucket · 01/08/2012 18:25

VicarGoingForGoldInKungFu · 01/08/2012 18:32

cheers - we have decided not to do this.

we have 2 loans, one with 1year left to run and one with 2 years left, after that we will be considerably better off each month.

i have applied to swap my CCard borrowing onto an interest free card for 16 months. we have decided that a bit of pain in the short term is worth it rather than starting all over again with a big loan.

cheers though!

mercibucket · 01/08/2012 18:37

Interest free always sounds good :)

VicarGoingForGoldInKungFu · 01/08/2012 19:28

plus i dont think i am disciplined enough to chop up the cards if i consolidate - i use it for car repairs in emergency as i need the car for work....

if we can rid the loans, then we can tackle the overdraft and after that the CCards.....we lived hand to mouth while i was bringing up the kids as i worked part time for 20 years- now im paying for it but at least i have a full time wage again.....

if we had consolidated it would have meant committing to a 4 year loan to pay the lot off - i think if we can tough it out until the loans are gone - so 2 years - the rest we could pay off fairly quickly but flexibly.

its tough, but the majority of the debt will be gone in 2 years. we may be able to live a little again after that!

castlelough · 09/08/2012 09:25

Hi Vicar,
I'm not sure if you have already been in discussions with your bank about moving house/another mortgage but here is my story.
I sold my apartment last year (never missed a payment etc). After renting for a year while starting to build our new house, myself and my husband have applied for a mortgage for less than half what my original mortgage was.
We were refused based on all of my 'short term debt' which was ?2000 overdraft, ?6000 credit card, ?8000 credit union (paid for work on the house).
The overdraft and credit card were considered bigger offenders than the loan, because they gave the bank the impression that I was a careless spendthrift which perhaps I have been and that I was living beyond my means; that I completely disregarded the terms of the overdraft by staying overdrawn indefinitely.

So, before we can reapply I have to sort out my overdraft and credit card first. It has been a bitter lesson but maybe a good one for life

What I wanted to point out to you is that although you think you will have the loans paid in two years time, it will probably take you another two to pay your overdraft and cc off after that. And the cc is running up horrific interest - the most expensive type of loan...

I would consolidate or prioritise my cc/od.
If you wait two years to sort those out it will negatively affect your credit rating :-(

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