Consolidation loans are not always bad

Just thought I'd post a positive story here about how new debt isn't always bad debt.

I had about £21k owing on 6 credit cards. I was paying £1,100 a month to pay those off - using as a snowball calculator. The interest rates varies from 7.9% APR for the lowest rate to 29.9% for the highest. was forcasting me to be debt free by May 2022.

When my bank offered me a loan, £15,000 at 3.7% APR over 4 years, I plugged it into to see what result it would have. It would allow me to pay off all but the lowest APR credit card - but the most interesting thing was that because my bank are happy to allow overpayments to pay the loan off early, by keeping the debt payments at £1,100 it actually results in me being debt free 3 months sooner (Feb 2022), _and_ paying about £2,000 less in interest by taking on the new debt and clearing the higher APR cards.

YNAB gives me the confidence not to fall back into the old ways of spending on the credit cards, and a couple of the highest ones will be closed, keeping the others just in case of dire emergency. (And using one of them as a paid-in-full monthly card to get the reward points).

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  • Very nicely done!  That last paragraph is the one that a lot of people don't latch onto and the consolidation loans end up hurting them.  But it sounds like you've got this debt thing by the tail.  Congratulations!

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  • When used responsibly, credit can be a great friend! I hope you'll join us in the Debt Smackdown Community Challenge! We're currently still on 2019, but it will be updated for 2020 by the new year! :)

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