Debt consolidation loan - Shall I?

Debt consolidation loan - Shall I?

Author
Discussion

Darko92

Original Poster:

283 posts

110 months

Wednesday 27th May 2015
quotequote all
Hello all,

So Ill try be as accurate as possible:

Im 23 and due to a poor set of choices in the last 3 years I've wound up with 4 maxed out credit cards @ 1k a pop. The APR on these ranges from a decent 18% to a shameful 39.9%.

Ive recently started a new job which pays quite well but is a very long drive away so the increase in earning has been out-weighed by the increase in fuel costs etc. This means at present I can only really afford to pay the minimum on all 4 every month. This has been the case for the last 5-6 months at least and I dont see things changing anytime soon.

So here is what I am considering..

Take out a debt consolidation loan from something like Avant (high apr, short term) for 4k with repayments @ £160 a month for 2 years. Yes, Ill be paying a hefty bit of interest but it'll mean I can clear my CC's. The total minimum payments i shell out for all 4 cards atm totals to £200 a month so the loan repayments would be less.

Am I being quite daft?

Poor credit history too btw.

Mercury00

4,098 posts

155 months

Wednesday 27th May 2015
quotequote all
What do you spend the rest of your money on? Why do you only want to pay £160 a month on a loan instead of paying more off and getting rid of your debt sooner? I wouldn't advise taking out a high interest loan for debt consolidation.

Darko92

Original Poster:

283 posts

110 months

Wednesday 27th May 2015
quotequote all
I cover almost 90% of my families mortgage on our home. This isnt optional, hence the issues im facing now.

I cant cover more than the minimum payments so @ £200 total for all 4 min payment. Or £160 to clear all 4 once and for all.

Not really sure on the best course.

Simpo Two

85,150 posts

264 months

Wednesday 27th May 2015
quotequote all
I'm not an expert in this area but wouldn't the first thing be to transfer the balances to somewhere with lower interest?

Then again if you can borrow £4,000 and repay it at £160pcm for two years that's only £3,840... have I missed something?

Du1point8

21,604 posts

191 months

Wednesday 27th May 2015
quotequote all
It would be easier to explain the income and the outgoings and then PH can recommend ideas from there.

Simple things like.

Do you have sky?
What mobile contracts do you have?
Can you buy a snotter and release equity out of current car, or buy a small diesel?
Do you have luxuries?

Its then that people can help out and find a way to consolidate the monies into one manageable amount.

jamesh764

184 posts

141 months

Wednesday 27th May 2015
quotequote all
When I was younger and even more stupid than I am now, the bank would persuade me to take out a loan to pay off the credit cards, which in theory would mean paying less interest and lower repayments.

In practice, once the cards were paid off, I'd max them out again and be back in the same situation but with a loan to pay off as well. This happened three times before I saw the error of my ways.

A consolidation loan is all well and good if you have self control, but perhaps this is a quality that is lacking in the sort of person that needs such a loan.

Darko92

Original Poster:

283 posts

110 months

Wednesday 27th May 2015
quotequote all
Whoops screwed up the details there.

It's about 160 a month for three years. Not two.

Also I would get a balance transfer card but I have a shocking credit history so no go.

In terms of outgoings and income. I have budgeted my entire day to day life and because of the mortgage I'm covering and extra bills and car costs etc I'm left with peanuts as disposable income.


mike9009

6,918 posts

242 months

Wednesday 27th May 2015
quotequote all
The interest rates you have on the cards are high. I had similar debts to you many years ago and once you get rid it is a weight off your shoulders!

I understand you have considered your incoming and outgoings. Before taking the plunge with the loan consider the following

1. Do you have any assets you could sell? Every little would help reduce the monthly payments? (old phones, games consoles, laptops, games, etc.) I sold some old Haynes manuals and got almost retail value for them on ebay - it can be surprising!
2. Can you earn some extra cash? Overtime, bar work, deliveries?
3. Have you changed energy supplier, mortgage, insurance?

Just some small things can be make a difference....

Best of luck!

Mike

BGARK

5,493 posts

245 months

Wednesday 27th May 2015
quotequote all
Ask your boss or maybe a friend with money if they will pay it off for you at a sensible interest rate over a sensible time period.

Might seem like an unusual thing to ask but I have done this to help two people out in the past.

You never know?

Darkslider

3,071 posts

188 months

Wednesday 27th May 2015
quotequote all
I have a poor credit history but still got accepted for a interest free Barclaycard, 0% for 36 months with a £4k limit. You get charged a 2.5% fee but that will be small change compared to the interest you'll be paying on a 39% apr card! Check MSEs elgibility calc and if it gives you a 50/50 chance of being approved or better, I'd try applying. Even if you get offered a lower limit/shorter term you could still get shot of your two most expensive CCs and start putting the money you'd be paying on interest into servicing the debts on the other two.

Obviously as well as this you need to have a good look at your outgoings and see if you can cut down on anything. This includes fripperies and releasing cash if you've got a valuable car. (you could pick up a clean and tidy E46 3 series BMW for not much more than shed money if you're worried about maintaining an image in a new job)

http://www.moneysavingexpert.com/credit-cards/bala...

Du1point8

21,604 posts

191 months

Wednesday 27th May 2015
quotequote all
Darkslider said:
I have a poor credit history but still got accepted for a interest free Barclaycard, 0% for 36 months with a £4k limit. You get charged a 2.5% fee but that will be small change compared to the interest you'll be paying on a 39% apr card! Check MSEs elgibility calc and if it gives you a 50/50 chance of being approved or better, I'd try applying. Even if you get offered a lower limit/shorter term you could still get shot of your two most expensive CCs and start putting the money you'd be paying on interest into servicing the debts on the other two.

Obviously as well as this you need to have a good look at your outgoings and see if you can cut down on anything. This includes fripperies and releasing cash if you've got a valuable car. (you could pick up a clean and tidy E46 3 series BMW for not much more than shed money if you're worried about maintaining an image in a new job)

http://www.moneysavingexpert.com/credit-cards/bala...
If OP has the 525d M Sport.

http://www.pistonheads.com/classifieds/used-cars/b...

Thats the £4k all day long...

Get rid and switch to something else, does it need to be BMW?


BGARK

5,493 posts

245 months

Wednesday 27th May 2015
quotequote all
Du1point8 said:
If OP has the 525d M Sport.

http://www.pistonheads.com/classifieds/used-cars/b...

Thats the £4k all day long...

Get rid and switch to something else, does it need to be BMW?
If this is correct then that is the answer, no brainer.

Darko92

Original Poster:

283 posts

110 months

Wednesday 27th May 2015
quotequote all
Indeed it is the E60 but it is part financed and selling it would only put about 2k in my pocket.

As for MSE calc. I was not approved on any of the 0% ones hah.

All this is very valuable so please continue

Jayyylo

985 posts

146 months

Thursday 28th May 2015
quotequote all
Darko92 said:
selling it would only put about 2k in my pocket.
BINGO! Get it sold and you've paid off two cards or one card if that £2k doesn't include cost to change. This may not be appealing but it's a much better option than taking out a loan.

andymc

7,334 posts

206 months

Thursday 28th May 2015
quotequote all
Jayyylo said:
Darko92 said:
selling it would only put about 2k in my pocket.
BINGO! Get it sold and you've paid off two cards or one card if that £2k doesn't include cost to change. This may not be appealing but it's a much better option than taking out a loan.
how would he get to work?

andymc

7,334 posts

206 months

Thursday 28th May 2015
quotequote all
Is there any overtime? perhaps a 2nd job or bar work, at some stage you will have to stop getting credit and pay it off, im not being contrite just I've been there and its not nice as the debts get bigger

WinstonWolf

72,857 posts

238 months

Thursday 28th May 2015
quotequote all
andymc said:
Jayyylo said:
Darko92 said:
selling it would only put about 2k in my pocket.
BINGO! Get it sold and you've paid off two cards or one card if that £2k doesn't include cost to change. This may not be appealing but it's a much better option than taking out a loan.
how would he get to work?
Cycle? At 23 you should be fit enough...

Jayyylo

985 posts

146 months

Thursday 28th May 2015
quotequote all
andymc said:
Jayyylo said:
Darko92 said:
selling it would only put about 2k in my pocket.
BINGO! Get it sold and you've paid off two cards or one card if that £2k doesn't include cost to change. This may not be appealing but it's a much better option than taking out a loan.
how would he get to work?
Read it again. £2k = 2 cards paid or 1 card paid plus cost to change vehicle.

Having one high interest card paid off will massively help as you can then pay more than the minimum on the other three or pay back a loan quicker.

Du1point8

21,604 posts

191 months

Thursday 28th May 2015
quotequote all
Jayyylo said:
andymc said:
Jayyylo said:
Darko92 said:
selling it would only put about 2k in my pocket.
BINGO! Get it sold and you've paid off two cards or one card if that £2k doesn't include cost to change. This may not be appealing but it's a much better option than taking out a loan.
how would he get to work?
Read it again. £2k = 2 cards paid or 1 card paid plus cost to change vehicle.

Having one high interest card paid off will massively help as you can then pay more than the minimum on the other three or pay back a loan quicker.
Or be cheap and if not too far a distance, go lease on a C1, its a few hundred down and £68 a month or so.

New cheap car for 12-48 months and £2k freed up for bills.

WinstonWolf

72,857 posts

238 months

Thursday 28th May 2015
quotequote all
Du1point8 said:
Jayyylo said:
andymc said:
Jayyylo said:
Darko92 said:
selling it would only put about 2k in my pocket.
BINGO! Get it sold and you've paid off two cards or one card if that £2k doesn't include cost to change. This may not be appealing but it's a much better option than taking out a loan.
how would he get to work?
Read it again. £2k = 2 cards paid or 1 card paid plus cost to change vehicle.

Having one high interest card paid off will massively help as you can then pay more than the minimum on the other three or pay back a loan quicker.
Or be cheap and if not too far a distance, go lease on a C1, its a few hundred down and £68 a month or so.

New cheap car for 12-48 months and £2k freed up for bills.
You're still paying interest "for nothing" though.