Next step in debt busting: loan

Tondella

Hi Guys

Next stage in debt busting is due. so far I have only been focusing on credit card debts (£21k at moment), bringing down the APR to no greater than 5.9% and snowballing payments (with about £300 per month left for overpayments)

I've finally got OH to get the low down on his consolidation loan with Lloyds TSB. As I suspected the APR is greater than any of our credit cards now, and so this debt has become a priority. Here's the SOA:

Lloyds TSB
outstanding amount: £6600.94
APR 10.9%, interest is calculated daily and added monthly
repayment: £416, 17 repayments remaining

There are no penalties for overpayment but if we wish to go for settlement then there is a penalty of £113. We don't have £6k in savings (we don't have any savings!) so we can't make an early settlement. However I am considering other options, but don't know how feasible they are

1) Balance transfer to a credit card at lower APR: I have my Egg anniversary coming up in March and so have applied to increase my credit limit with them to £6k. If i understand correctly i could SBT all but the last payment on the loan to the card, thereby getting the balance at 0% for 5mths and skipping the early settlement penalty?

2) Get a cheaper loan over a similar period? I mean cheaper in APR, not necessarily in repayments, unless the APR considerably undercuts our credit card rates (unlikely)

3) keep the lloyds loan and put our £300 per month overpayment towards the loan, leaving minimum payments on the credit cards

I'd really appreciate your help here, my feeling is to get the debt on credit card as it is more flexible than getting out another loan. I'm off now to update my signature to reflect our total debt, and not just the credit cards

Thanks!

Tondella

BUMP! Anyone got any thoughts on this?

skintchick

Hmmm...what is the Egg APR after the free period?

If you put your £300 extra on top of the minimum payment you're making now, you could get it down to about £3,000 in that time - what would you do with it after then?

I think you should put the scenario into the snowball calculator and see what comes up best, but check the Egg standard APR.

Tondella

Hi Skintchick

I've put two options in the snowball calculator. If we overpayed the loan it would be cleared by October. If we shift the balance to Egg for the five months 0% we would continue to overpay our lloyds card, which at 5.9% attracts the highest balance. This is based on the assumption that we can successfully apply for a LOB credit card to receive the Egg balance once the five months are over. As i have three credit cards to cancel in the next couple of months, and a good credit record I think this should be feasible. Alternatively, OH has a cleared Halifax card with £9k credit limit on it, so we could try to negotiate an existing customer balance transfer deal. Obviously the benefits with this system is that as well as getting the loan APR down by almost half we can just service the minimum repayments on the transfered loan, and so use the remainder of the £416, along with our £300 per month to pay off higher interest credit card balances in the interim.Do you think this is a little risky?

skintchick

My only worry would be not being able to transfer it anywhere after the deal runs out, but if you think you can do so then yes it makes sense.

Tondella

I'm worried too, but really we have excellent credit records and I'll be clearing £14.5k of credit from my record by cancelling those cards so I'm sure I'll be able to get something between a new application and negotiating with Halifax. fingers crossed eh?!

skintchick

YEah, I think you're right, and the 0% will give you a window to hammer the others.

Go for it - good luck.

Tondella

Egg have refused to up my credit limit Looks like I am starting to run out of options because of the amount of debt on my cards. I'm going to have to have a review of my priorities with regards to shuffling debt. It may be more prudent to shift off two balances ahead of their introductory offer date onto my OH's life of balance card so that I can decrease my available credit in time for the anniversary offer. Oh well, at least I have started to look at this now and not in March when the anniversary is upon me.

skintchick

Exactly - you have time to plan