Business & Finance debt consolidation loans. worth it?

[Hap Hapablap]

had this on the money board but it doesnt seem theres much traffic there than here. anyway over time ive gotten myself into a slightly high amount of debt. (roughly 20k) pretty much based on credit cards and loans, now the interest rates on the cards are pushing nearly 20% i thought to myself the only way will i ever be able to get a home would be to remove these ningly debts out of the way.

question to the money savvy folks out there, are debt consolidation loans reliable, do they indeed have a lower interest rate in order to make it easier for you to pay off, what can you pay off with the loan.

im roughly earning 68k but being paid monthly is quite hard to manage all my deductions as such, any particular organisations/banks that you'd recommend? any personal experiences? will be greatly appreciated.

 

[Scotland]

had this on the money board but it doesnt seem theres much traffic there than here. anyway over time ive gotten myself into a slightly high amount of debt. (roughly 20k) pretty much based on credit cards and loans, now the interest rates on the cards are pushing nearly 20% i thought to myself the only way will i ever be able to get a home would be to remove these ningly debts out of the way.

I don't get this. Unless you've had unexpected major medical bills then I'm scratching my head how there is a need to be in so much debt.

im roughly earning 68k but being paid monthly is quite hard to manage all my deductions as such, any particular organisations/banks that you'd recommend? any personal experiences? will be greatly appreciated.

I don't get this either. Why do people find this so hard? You are paid no less whether you are paid monthly, fortnightly or weekly.

If you can't make ends meet on $68k with no mortgage then I suggest you seek professional advice on how to budget. 20% p.a. interest on a $20k loan is not even $350 a month. The interest on a $400k home loan will be $2k a month more than that so if you can't kill the $20k debt in 12 months then you won't be able to manage a mortgage.

 

[Hap Hapablap]

I don't get this. Unless you've had unexpected major medical bills then I'm scratching my head how there is a need to be in so much debt.


I don't get this either. Why do people find this so hard? You are paid no less whether you are paid monthly, fortnightly or weekly.

If you can't make ends meet on $68k with no mortgage then I suggest you seek professional advice on how to budget. 20% p.a. interest on a $20k loan is not even $350 a month. The interest on a $400k home loan will be $2k a month more than that so if you can't kill the $20k debt in 12 months then you won't be able to manage a mortgage.

with the first part and due to pure idiocy, while i was studying i sometimes lived off my credit card due to lack of funds, id then max them out and not be able to pay them off. ive just finished my studies and realised on how screwed i am and how potentially it could hold me back. foolish and irresponsible behaviour but when younger, potentially easy money sounds great in the short term, horrid in the long term.

the second part is ive started a new job and do meet my needs, however i want to get rid of it quicker than later and thought putting them in one basket on one date a month would be far better than every few days during the month. as i said i just want to get the finances sorted but even that i have no clue who should i speak to or trust.

 

[Coledinho]

Two words for you

Declare bankruptcy

 

[daddy_4_eyes]

Just pay the debt. Get over the interest part, you just have to pay it.

You don't have a mortgage, so you can't consolidate through that.
Unsecured personal loans are about 15%, plus a fee for clearing it early & often a setting up fee, so refinancing it through a personal loan won't necessarily save you much.
Secured loans you can get it at 11%, but you won't be eligible for that due to the type of debts you have.

A possible idea, dump 100% of your pay into your CC, then pay for all your bills with your CC. As interest is calculated daily, this will reduce your interest payable each month.

That said, you need to be very disciplined in your spending so the debt is actually reduced each month.

 

[shibz_1989]

Well I'm in about $18,000 of debt. $3000 is credit cards (one is a St George one, the other is a GE one that I used to buy my bed, drawers etc). I'm currently paying these off at $100 a month each. In about 2 months time I will be applying for a debt consolidation loan. I am looking at a variable one that I will be able to redraw so that while I am on prac I can use that money if I need to.

My car loan is about $15000 but I don't know how much I've paid off (never get statements or anything).

Basically, I think it's worth getting one because:
1. You have one repayment
2. You are only paying interest on one loan rather then 2-3
3. The one repayment is always less then what you would pay if you were paying for the three separate loans

For example:
My car loan is $210 is a fortnight (so $420 a month) and then $200 for Credit Cards. So $620 in total. With a consolidation loan it is only $370 a month.

 

[JohnW]

Well I'm in about $18,000 of debt. $3000 is credit cards (one is a St George one, the other is a GE one that I used to buy my bed, drawers etc). I'm currently paying these off at $100 a month each. In about 2 months time I will be applying for a debt consolidation loan. I am looking at a variable one that I will be able to redraw so that while I am on prac I can use that money if I need to.

My car loan is about $15000 but I don't know how much I've paid off (never get statements or anything).

Basically, I think it's worth getting one because:
1. You have one repayment
2. You are only paying interest on one loan rather then 2-3
3. The one repayment is always less then what you would pay if you were paying for the three separate loans

For example:
My car loan is $210 is a fortnight (so $420 a month) and then $200 for Credit Cards. So $620 in total. With a consolidation loan it is only $370 a month.

please explain how your repayments can be lower while your debt stays the same? I think you will find that the term of your loan has increased in which case, when you do the numbers you will find you would have gone backwards

 

[shibz_1989]

Wait, I have no idea. And now you say it like that...

 

[pezz]

inb4caesar

 

[JohnW]

generally speaking, if you kept up the same levels of payments you are currently making but made them into your new "debt consolidation loan" you could be better off. But I am assuming the new loan will be unsecured so the intrest rate on the new loan will be similar to what your paying already.

Decreasing your payments and increasing the term of your loan does not lead to an overall saving. Unless the interest rate is a lot lower.

I personally would roll my balance of my credit card over to a new low interest for roll overs card and put every $ earnt into it to pay it off. I assume there will be break cost for a car loan which will generally erode any savings had by moving.

 

[Simon_Nesbit]

Look for "Balance Transfer" credit cards.

You used to be able to get 'lifetime' deals (20k @ 2.9% - haters gunna hate). You can still get 18 month 2.9% (ANZ has one for new gold's, earning >50k you'll qualify on income, don't know about cash flow).

Balance transfer as much as you can (95% of limit IIRC), and set that as a minimum payment for 18 months.

Every cent you earn goes on clearing the rest of the debt, until the only debt you have is that (cheat) credit card. At that point, start reducing down as much as you can.

Get rid of every other credit card (or keep one for emergencies/online bookings/etc).

Having a big limit card, with lots of room (and/or clearing regularly) looks very good when you go back to the bank - and often gives wiggle room or access to better deals in the future.

Can't manage monthly income? Most CC's have 45+ days 'interest free'. Set up a CC with a limit equal to your salary (lets say 5k). Use that for the month, then at the end of the month (when you get paid), you clear it in full. Anything extra goes off your 'long-term' CC.

ALL interest is bad. But interest at less than mortgage rates (~7% atm) is worth hanging onto.

 

[Simon_Nesbit]

In my former role, I helped a client. Their finances were a mess, with 7 credit cards, two mortgages, an overdraft - and also business borrowing on the house too.

I sorted them into a home-loan (30 year), instead of their existing 17 years remaining. The extra equity they borrowed cleared 3 of their CCs. In closing those CCs, they had enough positive cash flow to qualify for a 20k 2.9% BT card, which cleared all the other cards.

After we finished, they had 3 credit cards - the BT card (literally cut the card up), and each had a 5k 'spending account' CC which was cleared every month. Their entire salaries went into an offset account, which paid the 'spending' CCs and the mortgage every month.

Before meeting me they were paying nearly $4000 a month in repayments (1800 mortgage, 2200 CCs). Afterwards they had to pay only $2600 (2200 mortgage, 400 CC).

For twelve months, they continued paying the extra $1400 off the mortgage. When the BT CC expired, there was enough to simply pay it out in full, at which time they closed their individual CCs and just kept the one operating CC (cleared every month from their offset).

From the verge of bankruptcy, they'll end up paying off their house in about 7 years.

tl;dr - but basic financial story which worked exceptionally well for this couple, and from what you've said would work similarly well (minus the mortgage part of course) for you.

The secret is not to reduce your payments, but to make the payments you're allready making more effective.

 

[spuzzlord]

if you have debt on credit cards, consider applying for another card that offers low interest on balance transfers. sometimes you can get 6-12 months at low interest, which saves on the fees associated with loans as well.

just a thought