Debt Consolidation
Discussion
My girlfriend an I have got ourselves into a position whereby we have numerous debts all over the place and I am curious as to whether we could consolidate these and save some money.
We bought a house on a new development at a time when property prices were low and recently a exact same property in our development sold for £30k above what we paid for our own. As an aside to this we have approximately £12k woth of debts in the form of overdraft, credit cards and a loan.
Would we be worth while trying to remortgage our house to cover this amount and clear this off and enable us to free up some more cash day to day in order to potentially overpay on our mortgage whenever possible? Or sticking out the loan payments and credit card bills over the next 4 years until they have recovered?
I appreciate we should have controlled our spending in the past but some helpful advice would be much appreciated.
We bought a house on a new development at a time when property prices were low and recently a exact same property in our development sold for £30k above what we paid for our own. As an aside to this we have approximately £12k woth of debts in the form of overdraft, credit cards and a loan.
Would we be worth while trying to remortgage our house to cover this amount and clear this off and enable us to free up some more cash day to day in order to potentially overpay on our mortgage whenever possible? Or sticking out the loan payments and credit card bills over the next 4 years until they have recovered?
I appreciate we should have controlled our spending in the past but some helpful advice would be much appreciated.
For my 2p worth, I would be wary remortgaging so quickly after buying somewhere. You may have expensive early repayment charges as well as the cost of a new mortgage. That could easily be several thousand pounds you weren't bargaining on.
Aditionally if you add this to your loan , you are potentially paying interest on this for the term of your loan 20 or 25 years. The interest in that time can spiral in one direction.
I would look at the debts I had and pay the most of the most expensive first (i.e. store or credit cards). Then be able to cut them up and not add to them.
You could try a personal loan that might be at a cheaper rate. However, don't do that and then run another load of debt on your cleared cards!
Set yourself a budget and really try to keep to it, I know its easier said than done though!
Aditionally if you add this to your loan , you are potentially paying interest on this for the term of your loan 20 or 25 years. The interest in that time can spiral in one direction.
I would look at the debts I had and pay the most of the most expensive first (i.e. store or credit cards). Then be able to cut them up and not add to them.
You could try a personal loan that might be at a cheaper rate. However, don't do that and then run another load of debt on your cleared cards!
Set yourself a budget and really try to keep to it, I know its easier said than done though!
Depends what your current mortgage is, whether its tied in, how much equity you have in the house, how affordable the new mortgage is. Somelenders will not allow debt consoldiation above certain levels.
Above all else you need to consider that if you remortgage to debt consolidate, you will be secuirng unsecured debt.
It can be done, it may even be sensible for you to do so, as long as you then control your spending.
Above all else you need to consider that if you remortgage to debt consolidate, you will be secuirng unsecured debt.
It can be done, it may even be sensible for you to do so, as long as you then control your spending.
jimmyV8 said:
My girlfriend an I have got ourselves into a position whereby we have numerous debts all over the place and I am curious as to whether we could consolidate these and save some money.
We bought a house on a new development at a time when property prices were low and recently a exact same property in our development sold for £30k above what we paid for our own. As an aside to this we have approximately £12k woth of debts in the form of overdraft, credit cards and a loan.
Would we be worth while trying to remortgage our house to cover this amount and clear this off and enable us to free up some more cash day to day in order to potentially overpay on our mortgage whenever possible? Or sticking out the loan payments and credit card bills over the next 4 years until they have recovered?
I appreciate we should have controlled our spending in the past but some helpful advice would be much appreciated.
Card debt has to be the most toxic followed by the overdraft, assuming the loan is at sensible rates.We bought a house on a new development at a time when property prices were low and recently a exact same property in our development sold for £30k above what we paid for our own. As an aside to this we have approximately £12k woth of debts in the form of overdraft, credit cards and a loan.
Would we be worth while trying to remortgage our house to cover this amount and clear this off and enable us to free up some more cash day to day in order to potentially overpay on our mortgage whenever possible? Or sticking out the loan payments and credit card bills over the next 4 years until they have recovered?
I appreciate we should have controlled our spending in the past but some helpful advice would be much appreciated.
Step 1: Switch the card debt to a zero rate offer if possible to buy some time.
Step 2: Sell the car.
Step 3: Cut what you spend each week on food, drink, entertainment etc in half.
Step 4: Rent out any spare bedrooms.
A very simple thing which is often overlooked re credit card debt is to whack in everything both parties earn each month and then spend what you need to live that month on the card. This resets an element of the debt and lowers your interest charge.
I appreciate everyone is different, and only you know your exact personal finances, but i've seen people go down this route before, when what they should have done is cut their outgoings and pay off the unsecured debt as quickly as possible.
The people i know who have consolidated either by remortgage or secured loan on the house, have regretted it.
But like i say, everyone is different, and only you can decide the best course of action for yourself.
The people i know who have consolidated either by remortgage or secured loan on the house, have regretted it.
But like i say, everyone is different, and only you can decide the best course of action for yourself.
Indeed. The debt exists because the parties have been spending more than they earn. Consolidation on its own is not the solution but a way to buy time and assist in paying back the money, which can only be achieved by not only not spending money you don't have but spending much less than that.
Why is there a debt? Is it due to furnishing the property plus pricy holidays plus car?
If that is the case is that all now complete ie if you cleared the debt would there be any possibility that the debt would be recreated over a similar period of time?
If it's a no and you have fixed the high spending then you can look into the debt to reduce your interest charges.
Consolidation to another bigger loan to capture all could be much cheaper so you could lay more off PCM than currently on the same debt financing.
Await your response
If that is the case is that all now complete ie if you cleared the debt would there be any possibility that the debt would be recreated over a similar period of time?
If it's a no and you have fixed the high spending then you can look into the debt to reduce your interest charges.
Consolidation to another bigger loan to capture all could be much cheaper so you could lay more off PCM than currently on the same debt financing.
Await your response
audidoody said:
IMHO debt consolidation is like accepting your first heroin fix for free.
It works fine if you don't take on any more debt while repaying the consolidation loan.
That works fine in theory, and i like the analogy, how many people who take heroin for the first time become hooked (clear their debts with a consolidation loan and then carry on spending on the cleared cards/overdrafts etc)?It works fine if you don't take on any more debt while repaying the consolidation loan.
audidoody said:
IMHO debt consolidation is like accepting your first heroin fix for free.
It works fine if you don't take on any more debt while repaying the consolidation loan.
Well put it this way if you have say 7 different loans in some form or another all with different apr's but then have the option of consolidating then into 1 at a lower apr and same time frame it enables you to pay it off quicker. It works fine if you don't take on any more debt while repaying the consolidation loan.
I've recently cleared every single debt I have bar mortgage and I can tell you the hassle it has removed is fantastic. No more 15-20 statements a month now all cleared. I initially dumped it all into the mortgage but then paid it off vastly quicker than I would have previously partly due to apr c75% cheaper...
Not going to get in that situation again. Everything I will buy in the future will be a cash purchase save up then buy it not the other way around.
here i was with the OH last week, talking about finances etc saying we should clear the card then over pay on the car, due to the dreaded M word possibility happening late next yr, and well theres no need lol card is about 1200 on 0% and car is paid off in 2 yrs, think i was worrying for nothing. we have no other debts bar the mortgage. which to be fair think id rather over pay on that.
cossy400 said:
here i was with the OH last week, talking about finances etc saying we should clear the card then over pay on the car, due to the dreaded M word possibility happening late next yr, and well theres no need lol card is about 1200 on 0% and car is paid off in 2 yrs, think i was worrying for nothing. we have no other debts bar the mortgage. which to be fair think id rather over pay on that.
I'd rather clear the card and car debt, then start overpaying on your mortgage.AndyT77 said:
cossy400 said:
here i was with the OH last week, talking about finances etc saying we should clear the card then over pay on the car, due to the dreaded M word possibility happening late next yr, and well theres no need lol card is about 1200 on 0% and car is paid off in 2 yrs, think i was worrying for nothing. we have no other debts bar the mortgage. which to be fair think id rather over pay on that.
I'd rather clear the card and car debt, then start overpaying on your mortgage.jimmyV8 said:
stuff
Been there, done that, was a total mess, ended up in the nasty cycle of consolidate (nice small payment) then filling up that cards again. do that three times over and you're in a complete mess (and selling your house with no equity left because you've consolidated it all away!)My advice to you is to stick with it, clear the card(s) and loan(s) as fast as possible, shift them to zero rate cards if you can. Get rid ASAP, seriously, then if you're like me have a serious chat with yourself about living within your means. Don't let anyone see you doing this, it'll look mental.
For all the s
te that is spouted on money saving expert there are some good bits to it, get yourself on the income/expenditure calculator, work out what you can and cant spend. Some good tips for saving a few quid.Get yourself on a super tight budget for a year or two, you'll be surprised how smug you feel when you're all done and all that's left is the mortgage and you're free to remortgage to the best deal available.
Then you'll be able to make sensible and informed decisions on what's worth getting into debt for (nice car) and what's not (nice kitchen) and what you can afford and justify.
After you've paid it off and lived more frugally for a while you probably wont be very inclined to ever get into debt again. I know I'm not!
Good luck!
Gassing Station | Finance | Top of Page | What's New | My Stuff