Diablo

Agreeing with Pete

For many it can be a way out, generally interest payments are much lower than the sum of the other debts, thus cash flow is much improved.

At the end of the day, if you don't pay the credit cards, whatever, you may ultimately be declared Bankrupt and loose your home anyway.

Biggest problem, as you have pointed put, is that many will take on a consolidation loan and then run up more debt on the now cleared cards. They then are faced with huge debt on the cards and a consolidation loan to pay.

If, however, that happens its generally because those involved live outwith their means - not because they have to, but because they choose to. Or are so stupid they should never have been given credit in the first place.

Unfortunately those who get into trouble because they loose their job or suffer other unfortunate circumstances are in the minority .

What really pi55es me off is the adverts where Mr and Mrs get a consolidation loan and think..."oh look, we can afford to go on an expensive holiday or buy a new car"...

Er...no...thats not a good idea. Save the money so it doesn't happen again

Genuine consolidation loans are good - most banks and building societies will organise one - and impose conditions. The glorified loan sharks that advertise, however, are a different matter..

Oh, and Pete, for once I know my subject - have worked in Insolvency and Recovery for years.

[Edited by Diablo - 12/3/2002 9:13:28 AM]

Markus

Time for me to chime in.

I've done the debt consolidation thing. Why? Well, I had a 13k Credit Card bill, and was paying aprox 200 quid a month interest, plus trying to pay 400 - 500 quid a month off it. On top of that I had a 9k loan. aprox 600 quid a month. So things were a tad tight.

So I consolidated the lot with a 25k loan, over 5 years. This saved me an extra 400 quid a month, which goes into my savings account.

I DO still have my credit car, BUT, I HAVE learnt a very hard lesson, it's now paid off, in full, every month, but I only use it for fuel, or purchases when I don't have cash, eg; internet purchases, or 'big' items. And there are not many of those, thankfully.

I do know that I could use that 400 quid a month to finance a nice shiny new STi Type UK with PPP, BUT I'm sensible enough to know it's silly, plus I would like a flat (living at home does have some advantages).

I am now a lot more careful with money than I used to be, as said, lesson learnt. Wish I'd learnt it a lot earlier, or been more sensible a few years back, but hey ho, you lives n learns

[Edited by Markus - 12/3/2002 11:58:15 AM]

JoeyDeacon

Markus,

One thing I will say to you is it is pointless putting money into a savings account if you have outstanding debt. Instead of putting that £400 amonth into your savings account you should be using it to pay off your debt. The interest you are paying on your debt is far higher than the interest you are receiving on your savings so it is costing you more money each month to put it in the bank rather than using it to reduce your debts.




[Edited by JoeyDeacon - 12/3/2002 12:02:21 PM]

MarkO

It depends on what you're earning, and to a certain extent what you're using the card(s) for. We have a couple of guys here with over 25k on various cards; they write a credit card cheque to pay off a chunk of their flexible mortgages with the cards, and then bounce the cash around the cards every 6 months to get interest free borrowing.

[Edited by MarkO - 12/3/2002 12:20:16 PM]

MarkO

Okay. It's really very simply really.
Yes, you're missing the discrepancy between "I'll buy this when I have the money" and "I want this now". Two opposing forces, of which the latter is the stronger. Combine it with "ah, well, you only live once" and suddenly you have an overpowering force which acts directly on people, fuelled by raw elements such as 'consumer electronics' and 'sports car modifications'.

I guess you wouldn't understand, Tel.

[Edited by MarkO - 12/3/2002 3:29:28 PM]

davyboy

My house buying decision.

Shall I rent? no!

How much can I afford and still go on holidays, buy cars, get pi$$ed, eat food and genarally hoon about as if I was still at home.

To be honest debt is the work of the devil - I am happy to have a mortgage and little bit less happy to have finance on a car, the latter made easier by the fact I get given money to run a car from my company.

Debt sucks donkeys **** kids!



[Edited by davyboy - 12/3/2002 4:24:08 PM]

damian666

I dont understand debt consolisation. Why take on more debt just to pay off credit cards etc when you can then run them up again? I think if you get a debt consolidation loan then you should have to surrender your credit cards etc till its paid off.

Surely it just puts people in a worse financial position? Especially if 'your home is at risk'?

pslewis

desperate times sometimes need desperate measures - those that take these GENUINELY believe its just to 'Tide-them-over'

Pete

brickboy

All depends really -- of course the loan company's not doing out of the goodness of their hearts but for some people it's better to have a smaller single repayment per month (until they can get sorted) than several repayments that are cumulatively larger.

But ultimately, you end up servicing more debt

MarkO

Depends on your point of view. If you do it unsecured, you're basically doing 2 things:

1. Converting several possibly variable monthly payments at different (and usually uncompetitive) APRs into one single payment at a more competitive rate and a lower absolute monthly total.

2. Extending the term of the debt, making the monthly outgoings smaller.

By reducing the monthly outgoings, you're making your debt easier to manage, and thereby increasing the likelihood of being able to pay it off rather than just letting the debts spiral out of control.

Of course it usually doesn't work though, as most people consolidate their debts, reduce their monthly outgoings, and then decide that because they've got far more disposable income they can go out and buy more hi-fi, cars, home improvements, holidays, etc., and they end up worse than they started off.

As for secured consolidation, it's a good way to massively reduce the interest payments - even if the term of the debt remains the same (since a secured loan is cheaper, even if it is more risky).

Personally, I'd never consider secured consolidation - all the other debts/assets (cars, etc) are unimportant, whereas the mortgage repayments are essential.

damian666

This is what I am saying - you can still re-run up credit card debt as you are only credit scored when you get the card in the first place or apply to increase your limit.

I know its the individuals problem to assure that they will pay, but these companies do not make it any easier!

Dream Weaver

I have always done this - not with the "xxx debt management" bunch, but if I have a few different payments going out - car insurance, mortgage, loan etc etc, I sometimes ombine them into one easily payable amount. I dont extend the period or anything - just combine them - the amount is usually the same, but it is just easier to make one payment.

I have enough control not to use any credit cards again so am OK - I know what you mean though - some folk just cant control it

what would scooby do

How is it easier making just one payment ? Using Direct Debits etc (which most companies insist on) and timing them to debit the same day (usually the day after pay day for low income people) is manageable ??

what would scooby do

Sorry I came across as an ****** in that last post, what I meant by low income was actually people with a high outgoings to income ratio

davyboy

Sweet Jesus

Dude!!

TelBoy

davyboy, that's MarkO's average monthly credit card bill.

MarkO

There's a good bit of irony in that statement which I'm not going to expand on.

Regarding the comment about Markus's savings account, what he's doing makes sense, actually. Firstly, most loans other than mortgages aren't flexible enough to allow small over-payments. So he can probably only pay off the monthly payment or the whole loan.

Also, by paying off extra bits (if he has the option) he's not giving himself any leeway, since the monthly payments will still be needed regardless. Whereas putting money aside means that should the worst happen, he's got a slush fund to cover his monthly outgoings for a fair period.

If, after 3-4 years, he's not blown the slush fund on anything else, and it's sufficiently large, he may be able to settle the remainder of the loan anyway, and will get a substantian interest refund too.

One thing I only found out recently is that it's possible to suggest a settlement lower than the outstanding figure, and depending on the situation (and the offer you make) some finance companies may accept it. For example, I'm clearing a few bits and pieces now, and one of the companies said to me when I requested the settlement figure "the settlement figure is XXXX, but if that's too much you can suggest a figure yourself and if it's sensible we'll seriously consider it".

davyboy

Markus, I am genuinly shocked, and I promise I am not mocking, I cut my card up when I got £1000 in debt about 6 years ago, that was warning enough for me. At the time there was no way I could pay that off on what I was earning.

What on earth were you buying, and when you got to 5k did you not think "whhoooooo sheeet, i gotta stop spending!!"

Dream Weaver

That's the key Credit card surfing. I am currently on Tesco now - 0% on purchase and transfer til June next year. So I have a lot racked up on it (well, £3k), but then there is no interest charge until next June.

So after Xmas, when work picks up (and people start actually paying me on time ) I can just pay it off - like free money really

Dream Weaver

Forgot to add, then if the CC isnt paid off by June for whatever reason, just transfer to another CC with 0% for another year

Dave P

Yep, credit card arbitraging the way forward. Just remortgaged again. I now have a Barclays Openplan mortgage so I effectively earn 4.75% credit interest on my savings (coz they offset it against my mortgage). So if I get a 0% credit card, each month I can pay the minimum and slap the balance into my Openplan account instead. Then clear it all at the end of the 0% period. All that interest comes off my mortgage instead.

Also debt consolidation great for cash flow but not if you can't afford it. They should consider all loans based on a similar basis to mortgage lenders.

Dave

NotoriousREV

Damian,

I'm just doing the dreaded debt consoldation thing. The only way it will work is if I don't run up any more debt, but I save myself so much in monthly payments that there's not really anything I'd want that I can't save for in a few months.

Like you say, if you run it up again, you're stuffed!

TelBoy

What do people find SO difficult about controlling credit card spending???

Talk me through it.

If you haven't got the cash to finance it, you don't use your credit card. Simple. Or am i missing something???

NotoriousREV

Can't help with the credit card thing, that wasn't a problem, but whenever I had disposable income, I'd get a loan to fill it.

NotoriousREV

MarkO hits the nail on the head. I often always throw in a dash of "you can't take it with you when you're gone" and a soupcon of "I could be dead tomorrow"

MarkO

I also like "You're a long time looking at the lid".

TelBoy

Hehehe, oh yes i would Mark!

But how many times can a person lose sight of reality, aka their ability to repay their spending, before they realise what a dangerous situation they can get themselves into??

Paying a bank any interest is something EVERYBODY should avoid, imo. As 57% of people in a recent survey said, the one thing they wish their parents had told them as children was "Don't get into debt".

Well, for any of those 57%, i'm telling you right here, right now!!!

davyboy

"life is not a dress rehersal, you don't get another chance"

NotoriousREV

Depends on if their income is increasing along with the equity in their property, as long as the consolidation payments increase at the same rate then all is well.

I try, but they keep sending the bailiffs round.

Mine did, but I didn't listen to them.

I blame the catalogue my Grandma had, I was quite happy to buy stuff out of it at 50p a week. My parents shouldn't have let me, it's given me a bad habit.

MarkO

Tel, do you have a mortgage right now? If not, have you ever had one, or do you ever intend to?

If the answer to any of those questions is 'yes', the STFU!