Consolidation loan paying more than double back in interest?

[strawberriesandchocolate]

Hi,

If you have ever been in this situation how much did you pay back please ?🙏 my credit isn’t the greatest and our house is also ‘help to buy’ so to pay our £30,000 debt we are going to have to pay them back £70,000 over the span of 10 years. This amount is shocking to see on paper but works out about £400 less overall for us to pay back monthly than what we are paying now.

Our debt started when my partner crashed he’s car one morning on the way to work straight into a wall. Had to pay out for a new car while still paying the crashed one off. Then our mortgage rate went up so we was paying another £700 a month and bills doubled too. I was out of work after being made redundant after having my second child and the finances took a huge hit :(

Im now back in work and found a job that pays quite well that fits around the kids. We didn’t really want to go down the step change route as it could affect both our credit scores quite badly but seeing this amount we have to pay back is absolutely shocking. We have read that if we choose step change or any help that is similar it would affect us re mortgaging in the future.

From an outsiders point of view, what would you do?

Thanks

what are the terms like on the loan? Are you able to make overpayments? will you be able to refinance a couple of years down the line?

if you can it may be worthwhile taking the loan at this stage and having a plan to pay it off in the future.

Stepchange will not do anything that puts you in a worse position so I would also recommend that you hear their advice on what the best thing to do is. If they decide it is an IVA it will make it almost impossible for you to get any lending in the next 5 years but it may be worth it in the long run.

Didn’t the insurance pay for his car?

I assume, they only had third party cover

Sometimes going through a formal debt management arrangement is best even if it effectively puts you on a credit ban for some years as it frees you from high cost credit and forces you to live within a budget.

But without any numbers and a full picture of your circumstances its impossible to say what the best course of action is.

Have a look at the dealing with debt information on Moneysavingexpert.com, perhaps post your budget on their debt free wannabe forum and seriously consider taking whatever action they recommend.

It's worth knowing that consolidation loans rarely work as a long term solution for getting out of debt because as well as the high cost, people often fail to address the root cause of their financial problems and end up taking more credit when they still find themselves short of money.