Best way to clear CC debt

dnutt68

Hi,

I'm looking for advice on the best way to go about clearing my credit card debt. I'll give a quick history of how I got myself where I am today and hopefully someone can advise me on the best options to clear my debts from here.

I got divorced around eight years ago and took around £7k in debt out of the marriage. I was working shifts at the time, so was managing fairly well paying my maintenance and paying off my debts. Fate took a turn for the worse shortly after however. My car suffered engine failure and was basically a write off, so I purchased a new car - again it was affordable, but extended what I owed to approximately £17k.

Shortly after things got worse as I was taken off shifts due to a downturn in production and started working dayshift. This constituted about a 1/3rd reduction in my weekly wage, so you can imagine things were started to get really tight. I took the decision to consolidate my debts into one loan which helped a little, but I was still stretched and started using credit cards as a stop gap when I needed to.

This went on for a couple of years and I soon found I was really struggling to service my loan and CC debt. So I consolidated again and took out a £20k loan over 7 years (approx 4 years ago).

Since then, I have struggled on much of the time relying on Credit Cards to keep afloat.

Finally, financial pressures have started to ease somewhat, my son is now 19 and I no longer pay maintenance for him so that has helped. But I now find myself with £10k in CC debt and around £9k still owing on my loan.

I am coping quite well at the moment servicing the debt, and find I am no longer reliant on Credit Cards to get by, in fact I have a small amount of extra cash each month which is steadily clearing a long term overdraft I have had with my bank (approx £500 atm). However, I'm not getting anywhere in clearing the CC debt and am simply blowing £250 per month on the interest.

So what to do...

I don't really want to consolidate the loan I have as I have 36 payments left and I have already payed all the interest on this. So it is decreasing nicely at £300 per month. I have tried applying for another loan for £10k to clear the CC debt, but each place I try refuses me mainly because my personal unsecured debt is over £15k.

I am thinking of trying to transfer the CC debt onto 0% cards, but am unsure of whether I could get a card with a 10k limit? Or should I try and get a loan and neglect to mention I already have a loan that still has 9k to pay on it? I've even thought of trying to get a loan at a higher rate of interest just so it is at least getting paid of each month and not just wasted in interest.

It is so frustrating, I already paying more a month in interest to the CC companies than I would pay for a loan to clear them off, but its such a waste cause it doesn't even make a dent!

Any thoughts on the best path to take greatly appreciated

Verbatim

Hi,

Quite right don't consolidate, even if you could it would make the debt last longer at more interest overall.

No point in not declaring as it will all be there on your credit files. As will each new application you make for credit so if you've been refused recently stop applying for a few months. If you look desperate and/or overextended it will hinder you in getting decent deals in the future. You can get your credit files from the 3 different agencies for £2 each or look at the articles by Martin on this site for current free trials.

If you could tell us which cards have you have at the mo with balances, APRs and minimum payments we could perhaps suggest some swaps. Usually the best way to reduce the cc debts is to pay minimum only on all cards except the one with the highest APR and to throw all available cash at this card until it's paid off and then concentrate on the next highest and so on until all are gone. But if you have a card with a smallish balance which you could clear quickly you can often get them to agree a balance transfer at 0% or low %. You'd need to get a statement at £0 first and never spend on the card with the new BT (most cards except I think Nationwide pay off lowest % debt first so you'd lose all advantage). Read Martin's article on cc shuffling for more about this.

Hope you post some more to let us know how you get on.

dnutt68

Thanks for the reply Verbatim, much appreciated. I'll get the info on the Cards and post it later when I get home from work, and check out the threads you mentioned

GeorgeUK

Something else you should be aware of when applying for credit - you can have about 3 credit checks in a 6 month period before your credit score is affected. If you have applied a few times for credit in the last 6 months, do not apply for any more. This will make you seem desperate for credit and could take you a while to get back to a stage where someone may be willing to give you credit.

I would suggest also posting up a statement of affairs
http://www.makesenseofcards.com/soacalc.html

We may be able to advise of some other areas you could be making savings in as well as how best to deal with the cards, and possibly which cards may be best.

dnutt68

Hi again, here are the details of the cards I currently have

Virgin

Owed £5180
Limit £5800
Rate 2.5292% per month (no per anum rate is given on the statement or online)


Barclaycard (was Morgan Stanley before the takeover)

Owed £4045
Limit £4100
Rate 17.9% per anum

Egg

Owed £640
Limit £1350
Rate Interest free (trying to find out when this expires)

dnutt68

GeorgeUK wrote: »

Something else you should be aware of when applying for credit - you can have about 3 credit checks in a 6 month period before your credit score is affected. If you have applied a few times for credit in the last 6 months, do not apply for any more. This will make you seem desperate for credit and could take you a while to get back to a stage where someone may be willing to give you credit.

I would suggest also posting up a statement of affairs
http://www.makesenseofcards.com/soacalc.html

We may be able to advise of some other areas you could be making savings in as well as how best to deal with the cards, and possibly which cards may be best.

Thanks George, I'll check out the link you posted.

I have only applied once for a loan in the past few months, but I will refrain from any further attempts

dnutt68

Statement of Affairs and Personal Balance Sheet

Monthly Income Details
Monthly income after tax................ 1440
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 1440

Monthly Expense Details
Mortgage................................ 0
Secured loan repayments................. 0
Rent.................................... 120
Management charge (leasehold property).. 0
Council tax............................. 0
Electricity............................. 0
Gas..................................... 0
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 0
Mobile phone............................ 25
TV Licence.............................. 0
Satellite/Cable TV...................... 0
Internet Services....................... 18
Groceries etc. ......................... 120
Clothing................................ 20
Petrol/diesel........................... 60
Road tax................................ 10
Car Insurance........................... 55
Car maintenance (including MOT)......... 10
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 220
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 40
Haircuts................................ 0
Entertainment........................... 30
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 728

Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 3000
Other assets............................ 0
Total Assets............................ 3000

No Secured Debt

Unsecured Debts
Description....................Debt......Monthly...APR
Tesco Loan.....................9600......310.......0
Virgin Credit Card.............5180......158.......17.9
Barclaycard....................4045......80........17.9
Egg Card.......................640.......25........0
Total unsecured debts..........19465.....573.......-

Monthly Budget Summary
Total monthly income.................... 1,440
Expenses (including secured debts)....... 728
Available for debt repayments........... 712
Monthly UNsecured debt repayments....... 573
Surplus(deficit if negative)............ 139

Personal Balance Sheet Summary
Total assets (things you own)........... 3,000
Total Secured debt...................... -0
Total Unsecured debt.................... -19,465
Net Assets.............................. -16,465

Created using the SOA calculator at https://www.makesenseofcards.com.
Reproduced on Moneysavingexpert with permission.

I've guessed at the Virgin Rate, because the monthly rate means
nothing to me.

Also, I've left my Tesco loan at 0% apr as I've already paid
the interest on this, which was confirmed when I last checked
the outstanding balance.

MurrayMint

dnutt68 wrote: »

I've guessed at the Virgin Rate, because the monthly rate means
nothing to me.

Hi dnutt68,

I would put your Virgin interest rate at about 30% APR - that's why you're drowning in interest! Call them and check, but my calculations bring me out about there
£100 x 2.5292% = £2.52 monthly per £100
£2.52 x 12 = £30.35 annually per £100
£30.35 / £100 = 30.35%

The did increase most peoples interest rates early this year and 29.9% is not that uncommon with MBNA these days!

Another way to put it is on a £5,180 balance, 2.5292% means £131 interest every month. So if your min. payment is £158, then your only paying £27 off the balance every month - or 0.5% of Virgin debt :eek:

If my maths is wrong, please correct me!!

HTH
MM

dnutt68

MurrayMint wrote: »

Hi dnutt68,

I would put your Virgin interest rate at about 30% APR - that's why you're drowning in interest! Call them and check, but my calculations bring me out about there
£100 x 2.5292% = £2.52 monthly per £100
£2.52 x 12 = £30.35 annually per £100
£30.35 / £100 = 30.35%

The did increase most peoples interest rates early this year and 29.9% is not that uncommon with MBNA these days!

Another way to put it is on a £5,180 balance, 2.5292% means £131 interest every month. So if your min. payment is £158, then your only paying £27 off the balance every month - or 0.5% of Virgin debt :eek:

If my maths is wrong, please correct me!!

HTH
MM

Eek!!! :eek:

Ye, it kinda struck me when I was writing out the rates above, and noticed my Virgin Payment was almost double that of the Barclaycard payment, despite the fact that the difference in the outstanding debt being around a grand!

This has to be my priority for change then :mad:


Thanks MM

GeorgeUK

34.95% for virgin i get

2.5292% as a number = 0.025292
add 1 = 1.025292
1.025292^12 (to the power of 12 for 12 months) = 1.349494
subtract the 1 = 0.349494
as a percentage = 34.9494 (34.95%)

You need to get this reduced asap!!

Have you looked at your credit report? You can do so free at experian (if you cancel within 30 days). This will show you what accounts you have had in the past 6 years as well as what credit checks you have had. Look to see how many you have had in the last 6 months. Also make sure you are listed as being on the electoral roll at your current address. If you are not, do not apply for any credit until this has been updated.

Rent.................................... 120
Are you living with your folks? You aren't paying any bills or insurance, so thought i'd check.

Groceries etc. ......................... 120
How many is this for? If just you, this can be reduced. Have a look at the old style board for meal plans.

Also worth taking a look at the snowball calculator to see the best order to pay things off on and also to see how much interest you are paying and could save.
https://www.whatsthecost.com/snowball.aspx

Edit: If you have only had 1 credit check in the past 6 months, i think you should definately try to get another 0% card. Even then, you should be contacting virgin to see if they can reduce the interest rate. Don't close the card if you do manage to vlear it though - there are a few balance transfer tricks you may be able to use later that will reduce the interest you are paying by even more.

MurrayMint

Thanks George. I'm sure you're right. I was working it out using a method that someone had once explained in another thread.
34.95% is the rate that MBNA put my CC's up to shortly before I called time and started my DMP !! I'm sure this action (taken on sooo many accounts) has played a significant role a great number of DMP's. But then they were liberal lenders...