Offered consolidation loan, not sure whether to take it

dubdev

Hi there,

I have a number of personal loans with a particular company with varying terms and interest rates, and I have been approved for a consolidation loan to merge them into one 5 year loan.

This would almost halve the monthly repayments but obviously increase the total cost of credit. I'm not sure what to do, as I'm trying to maximise my cash flow (disposable income currently €500 P/M after all bills,rent etc paid) maintain a respectable credit rating and also pay off the loans as soon as I can.

I was going to go ahead with the consolidation loan until someone advised me that I should pay my debt off as quickly as possible as I do plan to start saving for a mortgage in the future and the sooner I pay off my debts the sooner I can start saving. However, I have been extremely stressed about money in recent months, and the first of my loans does finish until early next year. I'm not sure if I can cope with that stress for another year, and having more wiggle room might relieve that for unexpected expenses.

Sorry if that all seems a bit all over the place, any advice would be appreciated.

troyzer

You should go to the shop and keep buying scratchcards until you win.

Then you can pay off your loan.

Keano

Consolidating loans can be a good idea, yes you may pay more in the long run but you will have one monthly payment a month and know that in 5 years you will be debt free. Also applying for a mortgage it will be easier to explain a once a month payment rather than several of them.

dubdev

Keano wrote: »

Consolidating loans can be a good idea, yes you may pay more in the long run but you will have one monthly payment a month and know that in 5 years you will be debt free. Also applying for a mortgage it will be easier to explain a once a month payment rather than several of them.

Yes, the idea would be to not do it in 5 years but pay it off early as other debts are paid off. My hope would be that the extra interest payable would be kept to a minimum that way.

Wheety

Are you in a position to over pay the loan with the smallest balance? Get that paid asap, then roll those payments on to the next lowest. And so on.

Or your idea above if you don't mind the consolidated loan. Just don't borrow any more.

_Brian

Wheety wrote: »

Are you in a position to over pay the loan with the smallest balance? Get that paid asap, then roll those payments on to the next lowest. And so on.

Or your idea above if you don't mind the consolidated loan. Just don't borrow any more.

This.
I would only take on the new loan if you can overlay with no penalty.

Oh, and obviously if it’s with a proper lender. If your into some of those organisations that live off rolling over debts then look for a way out.

Saw on Sky where a lady in the U.K. borrowed £500 amd ended repaying £88,000

Markcheese

Check the interest rate and terms,
If the overall interest rate is lower good,
Then check are there penalties for paying off the loan quicker,
If the new monthly repayment is half what you were paying, you should/ could be able to pay more than the minimum and seriously shorten the length of time you are repaying
your loan.
(although I doubt the lender is offering out of the goodness of their hearts, it could well be that they make more in interest, and are more likely to sell you other loans....)

Markcheese

Or as weety said about paying off one loan first...
I'd probably try paying off the one with the highest interest rate fastest,
Are any of them credit card debt, cos that's pretty expensive,

Wheety

Markcheese wrote: »

Or as weety said about paying off one loan first...
I'd probably try paying off the one with the highest interest rate fastest,
Are any of them credit card debt, cos that's pretty expensive,

Normally I'd advise people to get rid of highest interest first but if you have several loans sometimes it's better to start getting rid of some. You feel like you're making progress this way.

dubdev

Thanks for all your replies. After talking to MABS I've decided to go ahead with restructuring as I think the peace of mind it'll bring me will be worth whatever extra bit of interest I have to pay.