Getting UK loan to pay off US debt

i'm not a money whiz by any means, but i've been throwing an idea around and want some feedback on what others think or if anyone else has attempted this:

my thinking is that i would like to get a loan in the UK to pay off my debt in the US.  i have no idea if i will qualify for a loan, or if the bank (or any other lending company) would even give me one based on my reason for wanting it, but it's worth a shot.  i figure the least they will do is say no.

before i start applying away, are there any downfalls to this that i might not be thinking about like being taxed on the US side?  by my calculations, it's going to take me years to pay off my US debt by just transfering money each month from my UK account to the US account, and during all that time i'll be racking up finance charges as well (i've already shuffled everything around and have managed to lock myself into an 8% APR for the life of the balance...so at least i have that going for me).

any thoughts?

Oh I REALLY hope someone, anyone can shed light on this one. I am in the EXACT same situation and at the rate I'm going I'll never pay it off.

HELP US! lol

I think that, regardless of what country you are in, in general taking out a loan to pay off a debt is a bad idea.

It makes no sense at all to try to get rid of debt by taking on more debt.

I think that, regardless of what country you are in, in general taking out a loan to pay off a debt is a bad idea.

It makes no sense at all to try to get rid of debt by taking on more debt.

well, depending on the interest they are currently paying, that might be true or false.

Plus, i can see how it would make sense given the power of the pound against the dollar at the moment. Sorry, i don't know more.  But i can tell you my DH did consolodate his debts into one lower interest one and it made it so much faster to pay off.

i understand that taking out a loan to pay debt is not the best idea....but i feel like i could really take advantage of the exchange rate.  in my mind, i would need to get less of a loan in this country to pay off my US debt than if i were in the US.  so i guess when it comes down to it, i'm trying to work out how i can pay off my US debt for the least possible amount.  

Plus, i can see how it would make sense given the power of the pound against the dollar at the moment. Sorry, i don't know more.  But i can tell you my DH did consolodate his debts into one lower interest one and it made it so much faster to pay off.

exactly...i'm trying to take advantage of the strength of the pound.

i transferred almost all of my debt to one credit card at 8%, which is helpful, but i'm trying to figure out a way to get it paid off as fast as possible.

It makes no sense at all to try to get rid of debt by taking on more debt.

if she's only borrowing the amount she needs to pay off the other loan, it's not 'more' debt.

if she's only borrowing the amount she needs to pay off the other loan, it's not 'more' debt.

Exactly. It also is then easier as I won't have to send money home in a bank draft and pay those fees or send it through PayPal, etc. It's a hassle

if she's only borrowing the amount she needs to pay off the other loan, it's not 'more' debt.

She would have to pay back interest on the new loan, in addition to the interest that has accrued on the old loan.  So it is more debt in the sense that she would owe more money in interest payments. (Assuming that she couldn't get a lower interest rate on the second loan.)

And considering the reason she would be taking the loan, if any bank would loan her money, they would probably charge her quite a high interest rate, as she is already a bad credit risk. If she could get the bank to lend her money at a lower interest rate than she is paying now, it would be worth it.

She could shop around and see if she could get a loan that would  be worth it.

P.S. This is the latest I could find from the FSA re debt consolidation:

A range of products are being marketed at consumers with debt repayment
problems, including debt consolidation loans and debt management plans.
Sales of these products are not covered by our conduct of business rules,
but can raise concerns from a public awareness perspective. Debt
consolidation loans and management plans typically reduce the borrower’s
monthly debt service payments, but spread the debt over a longer period of
time, ultimately resulting in higher borrowing costs. Secured debt
consolidation loans have been popular, driven partly by the amount of
equity accumulated in property, but also because if the borrowing is secured,
this can secure a more attractive rate of interest. But the borrower also runs
the risk of having their home repossessed in the event of default. Interest
rates for these types of products are not as competitive as a conventional
re-mortgage provided by a high street lender and broker fees can be high.

Source: http://www.fsa.gov.uk/pubs/plan/financial_risk_outlook_2004.pdf

Strange coincidence. I just got an offer for a debt consolidation loan in my monthly statement from Abbey.

Now I see how they make their money.

They provide an illustration for a £7,500 loan, paid back over 5 years, with a 6.1% APR (footnoted that the interest rate depends on their credit assessment.)

The total to be repaid shown is more than the amount that you would calculate based on a 6.1% APR. This is because you are also required to take out a loan of £1791.31, or 24% of the original £7,500 loan, to pay for "payment protection insurance" - i.e. they have to insure against the fact that you are a bad credit risk.

The total payments you have to make come out to £10,761, which is effectively a loan of £7,500 with a 15% APR.

 I checked the numbers on the FSA loan calculator at http://www.fsa.gov.uk/consumer/04_CREDIT_DEBT/loan_calculator.html

So you are not not getting a low interest rate at all.

This is because you are also required to take out a loan of £1791.31, or 24% of the original £7,500 loan, to pay for "payment protection insurance" - i.e. they have to insure against the fact that you are a bad credit risk.

i'm wondering if this is common practice with any/all loans in the UK, or if it's just Abbey?  if it's common practice, i think i'll pass on my loan to pay off my debt idea.

I dont believe there is any requirement to take their payment protection insurance.  I've had several loans and mortgages in the UK, and have never been forced to take this.

I dont believe there is any requirement to take their payment protection insurance.  I've had several loans and mortgages in the UK, and have never been forced to take this.

I don't know what your experience was, but the illustration was specifically for a debt consolidation loan, so the money is being loaned to someone who is already a  bad credit risk.

I wouldn't expect you to have to pay payment protection insurance if you were getting a mortgage or a car loan and had good credit.

edit: OK, I found this article. It seems that payment protection insurance may not be required, but is pushed. In the Abbey example, it was automatically included in the illustration. It seems that the PPI becomes part of the loan deal -- you take a loan at an advertised low interest rate, but to do so, you have to take the PPI. You could be better off taking a "worse" deal, at a higher advertised interest rate, but without PPI mixed in.

Kaleidoscope, if you just take out a normal personal loan, rather than a specific 'debt consolidation' loan such as Sweetpeach outlined above, you probably wont have a problem.

Taking a debt consolidation loan, though, doesnt necessarily equate with having bad credit.

See the edit to my previous post.

Taking a debt consolidation loan doesn't necessarily mean you have bad credit, but the fact that you have enough debts to need one doesn't look very good.

Also, the fact that you are in a sort of desperate situation - you need to pay your debts, you don't need a house or a new car- means that lenders are more likely to take advantage of you.