The Irish Independent 10.07
Finance(Sinead Ryan).
October 2007
Q: If I have four loans including a mortgage. If I bundled them altogether in a consolidation loan, would that be a good idea? Any ads I've seen would indicate that my monthly outgoings would be less.
A: I'm not a fan of loan bundling. It's an expensive way of paying for short-term luxuries. The reason your monthly outgoings drop isn't to do with moving all the loans to one company, it's because the now consolidated loan is generally charged as a mortgage against your home.
The repayment period jumps from, say, five years on a car loan to 30. Your car will have given up the ghost long before it's repaid and your home is at risk if you can't afford it. It is possible to arrange consolidation loans that allow you to repay the smaller loans over a shorter period than the big ones. If you go down this route, and are disciplined enough not to use the freed- up money to take out new loans (or spend on your credit card), then make enquiries.
MABS, the money advice people, say that people should be cautious of such loans because they put homes at risk, and the Financial Regulator's office has repeatedly pointed out that debt consolidation generally works out more expensive - even though monthly repayments appear lower.
Q: With property prices finally falling, my girlfriend and I want to start saving for a house. Where would be the best place to start a deposit, or should we just borrow it from the credit union? Is there any chance there will be another SSIA scheme announced in the budget?
A : The chances of another SSIA scheme being announced in the short term are somewhere between zero and none. Regard the venture as a gift horse never to be repeated. As to borrowing, credit union or otherwise, this is a bad idea. You will end up with two loans and a house that may potentially lose value before it increases. This is what 100pc mortgages are for, and their value has been dubious at best.
Security has to be your first check box in terms of saving and the rate of growth second. The two are not always mutually compatible. The important thing is that a reputable savings record is kept so that when you eventually approach a bank for the mortgage, you will be able to prove your ability to save. Check the deposit rates at different institutions. I would usually advise people to avoid short-term 'special offers, but in the case of savings, why not? Become a rate tart and split your savings between two high interest-bearing accounts. You can afford to go for 'locked in' rates, which tend to be higher as you won't be touching the money for a while.