did it work for you....?

Stu · Joined: 25 Apr 2007 Posts: 15

I am stuck with thousands of pounds worth of debt and take full responsibility for the situation that i am in, although i do feel debt consolidation contributed to my financial devastation!!

yes - you pay off your debt in one lump sum payment and often with a lower monthly payment BUT you can still obtain credit!!! and people will!!!! i did!! And now i am facing the decision between an IVA or Bankruptcy!!

This is just my opinion but I would interested to know whether there is anybody out there who feels that debt consolidation has been the cure to their financial problems? Or indeed feels the way i do about it...?

Stu Sad

Andrew · Posted: Tue Jun 19, 2007 8:09 am Post subject:

Stu,

Debt consolidation can work - but it absolutely depends on remembering that what you do when you consolidate is swap one debt for another.

Generally, consolidation means swapping a bundle of different debts with high interest rates for one debt at a lower interest rate and(usually) a longer (often much longer) payment period. Many people will pay more over the life of a consolidation loan than you would if you could have kept up the payments on the original debts - the difference is that the lower interest rate means you can actually afford to pay.

However, your debt's not gone - it's just changed into something different: Too many see consolidation as a reason to borrow again, or build up more card balances - often with the encouragement of lenders.

Stu · Joined: 25 Apr 2007 Posts: 15

Hi Andrew

Thank you for your response

Yes - I am sure there are some people that consolidation is/has been the solution for, but I now see it as ANOTHER way for the banks to make money!!

Quite a few years ago, i used to work for a high street bank and our policy on lending to individuals was 'lend no more than 50% of their annual salary'. How this has now changed!!

I now earn £22k per year, have a £30,000 unsecured consolidation loan and a further £8k on credit cards. How was i ever supposed to pay that back??????

NinjaVicar · Joined: 16 Jan 2007 Posts: 2

You cannot blame your situation on the bank for lending you more money than you can afford to pay back Stu.

Everyone's circumstances are different and if you apply for a loan and have a high enough income the bank should lend you the money otherwise hardly anyone would be able to get loans out nowadays.

You got yourself into this situation and like the rest of us you are going to have to put your head down and work hard to get out of it.

Stu · Joined: 25 Apr 2007 Posts: 15

NinjaVicar

As i stated on my first post on this subject - i do take full responsibility for my personal situation! I have had a good time whilst spending my £38k and i cannot deny that! I always knew one day that it would creep up and bite me on the behind - today is that day!

But i do feel that the banks play a major part in the overspending of people nowadays! Someone will always lend you money. My credit rating is black, i am on the verge bankrupt BUT i still get offered consolidation loans. I am 29 - if i was to take one, i would probably be paying it off until i was 75 on an interest rate of 59.9%APR!! rididulous!!!

Boo · Joined: 18 Jun 2007 Posts: 8

interesting debate here.

I once tried a consolidation loan but i was addicted to spending and so had no will power, this was never going to be something that worked for me.

i know plenty of people that have consolidated their dbts and are organised and committed to clearing their debt and not over spending anymore. I think it is these kind of people that consolidation works for.

queeny · Joined: 18 Jun 2007 Posts: 2

Hi all,

no-one would lend me money hence why i am looking into an IVA. all i wanted was another loan to clear all my debt but nobody would give me one.

jaymo · Joined: 25 Jun 2007 Posts: 5

Hi, consolidation didn't work for us. We found it very easy to borrow money to pay off all the credit carda and loans. My husband then found it even easier to go out and spend on his credit cards again instead of cutting them up and totally getting rid of them. We ended up with several loans, all aimed at consolidating our debts, but each time he would go and use the cards again. Because of this we now have two secured loans as well as the mortgage and are in an IVA. Although I realised a long time ago that we had to stop spending and tried to stop my husband I could't get throughto him. So the IVA was our only saving factor. If it hadn't been for that I don't know where we would be. I do think that banks lend out too much too easily

Kam · ClearDebt Advisor Joined: 29 Nov 2006 Posts: 5

If you want to retain your credit rating for the near future, debt consolidation can work providing that you stick to tight budgets, you will have to cut up and close any card accounts that you have and be adamant that you will not apply for anymore. On the the other side of the coin, you may wish to consider an IVA as an alternative to bankruptcy as you will likely repay a percentage of what you owe rather than all your debt and then be debt free after normally five years. In bankruptcy, you may still have to repay back money to your creditors if you have what they would consider a more than average surplus amount left over after your income and expenditure figures are taken into account. Also the fact that your name will also appear in the local press regarding your bankruptcy details. Good luck with your decision.

Stu · Joined: 25 Apr 2007 Posts: 15

Thanks Kam,

So if i have defaulted on ALL of my credit agreements but someone out there offered me a consolidation loan and i took it and made all my payments on time until it was paid off....would my credit rating repair quicker than taking an IVA or bankruptcy proceedings?

Kam · ClearDebt Advisor Joined: 29 Nov 2006 Posts: 5

If you did manage to secure a loan despite all your defaults, and provided that all the debts were paid in full, it would show on your credit file that all debts are satisfied but the defaults will remain on your file for 6 years. if you was to proceed with an IVA, your credit rating would not be clear for roughly the same amount of time, your IVA would finish after 5 years, but then you would have to wait until at least 6 months after the IVA to start applying for credit again if that is what you wanted to do. In bankruptcy the minimum dischargement time is 12 months, it can go further but it depends on the details of your bankruptcy held by your trustee. Your credit rating could be affected many years after once your bankruptcy period is complete, it is always the last point of call in my opinion.