Would a consolidation loan be right for us?

[MaryBoBary]

We currently have debts of around £8k between us as a couple (we also have a 2 year old son). I had to stop work due to mental health issues which meant our debts spiralled as it took our local benefits office 6 months to finally begin paying all benefits we are entitled to, and in our current situation we can not afford to repay anything each month.

We are in the initial stages of applying for a debt relief order as our circumstances are so dire. We have paid our application fees and the DRO agency are working on there required checks currently.

Yesterday we were offered the opportunity of a lifetime to move in with my family rent free in order to pay off our debts and save for a deposit. We are over the moon.

This means we can now look at repaying our debts again rather than proceeding with the DRO.

We have terrible credit scores due to the above - could we still get a loan to consolidate out debts? We would be able to pay £300 per month whilst comfortable meeting our other living costs and having a better quality of life. Looking online companies offer a loan for the amount we need st around £260 per month which is perfect. Do you think our credit rating will make this option impossible? Although we have credit card debt we have never applied for a loan so not sure on the process. Will the fact that we will now be living rent free help to negate the fact our financial situation has been so bad up to this point?

Any help or pointers would be great.

I used to work for a bank so have some experience here. If your credit is that bad, you will probably be able to get a loan but at a significantly higher interest rate than advertised. Loans are given out based on affordability criteria, so moving in with family and having fewer outgoings will definitely mean you are more likely to have one agreed

Thank you that’s useful

It's unlikely. How much are you looking to borrow?

Having missed payments won't encourage any lenders

We would want to borrow about £8k. Do any companies off consolidation loans specifically for bad credit does anyone know?

Bad Credit loans = another name for loaned with a horrendously high interest rate.

Interest rates are based on how much of a risk a lender perceives you to be, hence a bad credit history equals a high rate.

It’s unlikely to be financially viable for you to consolidate, even if you can get a loan.

Go to the Money Savibg Expert website and look up “snowballing”, it will help you pay off your debt by spending as little on interest as possible and also is a great way to keep motivated in paying off our debt!

You won’t get a loan for £8k. The only way anyone would consider lending you that with a bad history of missed payments would be if it were a secured loan, which obviously you wouldn’t get.

As others have said, in your circumstances, it is likely that the interest rate of a consolidation loan would be high, making the loan expensive, even if you do qualify for one.

£8k isn't that much in the great scheme of things. Might the family you are moving in with be able to lend you the money? If your income is secure and you have low outgoings, you might be able to pay it back in a year or two, and you could pay them interest at a similar rate than what they would get in a savings account, which is likely to be far less than a bad credit loan.

Barbara I think that is what I will have to do. I feel awful having to ask for more when they are already giving up their home for us - but the whole point of it is to get in to a better position. I’m pretty sure they wouldn’t want me paying back at high interest rates.