Girlfriends Debts, whats the best option?

NiceCuppaTea_2

I sat down with my girlfriend last night and we went through how much she owes on each of her 7(!) credit cards. We ended up with a figure of roughly £10k. Most of the debts were accrued purchasing and moving into her house a couple of years ago.

She has her own mortgage and comfortably pays it off each month, even more so since i moved in a few months ago and pay half of it. Making the card repayments isn't an issue either (shes been paying roughly £400/month off for a long time) but the cards are all costing a fortune in interest. We want to find a plan to start making a serious dent on the total amount OR reduce how much goes out each month paying them off. Although she pays more than the minimum amount off each month it doesnt seem to be getting much smaller. As far as we can tell, the options available to us to start making an impact are:

- Balance transfers to 0% credit cards
- 1 loan to pay the cards off
- Increase mortgage?

We're not even sure if the last one is possible, im sure i've heard people have done it before though.

Can anyone advise what the best option would be to take? Any advice would be really appreciated. TIA

mogchops

Hi and welcome!!

Isnt your girlfriend lucky to have such a caring & helpful boyfriend!!

I'm sure there will be lots of chaps and chapesses along shortly with some very good advice, but I would say of your 3 options, definitely do not increase mortgage or get consolidation loan, as you will end up with a lot more interest in the long run.

If you can post on here details of all the cards, interest rates, amts outstanding etc etc, then the clever peeps can advise you of the best way forward. Good luck!!

Jenna

Hey,

Great name - I could go for a nice cuppa right now! :rotfl:

Well done on being so supportive of your girlfriend - I hope that she is fully on board with sorting this out, too; it's lovely that you want to help her out but she needs to work at this too.

The best thing to do first of all is to create an SOA (see the sticky at the top of this board) so we can see if we can find some ways to free up extra cash to throw at that debt.

Then, get her to dig out all her paperwork and go through it. Make a list of the debt, amount owing, min. payment required and the interest rate.

If her credit rating is fairly decent you could try to get a 0% CC offer (evenif it's only for part of the amount, it will help!).

It's not a good idea to increase the mortgage / get a loan because of a LOT of different reasons. Some of the main ones that spring to mind are:

~ Once the worry of high CC bills has gone, what if she spends on the cards again? (and I know she won't mean to, but so many people on here have done just that, so be careful here)
~ You may lose the flexibility to overpay
~ With a mortgage it may make the debt cost MORE e.g. 10% for 5 years probably costs less than 4% over 25 years (I'm not great at maths, but you see where I am going with this)
~ With a mortgage it secures the debt on her home - which means if she can't afford to pay it, she'll lose the house. This is NOT good - much better to keep the CCs totally separate so they have no claim
~ Loan to value ratio - e.g. how much you need to borrow to re-mortgage. The mortgage needs to be as low as possible (e.g. capital as high as possible) to get the best re-mortage deals these days

HTH

poorandindenial

Hi Nice Cuppa Tea

The best option is always the one with the least interest. Does she have any additional cards that she has nothing on? WHat are the balances and limits and APRs on the cards?

It may be worth juggling a bit to get as much as possible onto a 0% card (if she has a good credit record and can get one) and also to see if she can get any life of balance rates (barclaycard do 6.9% LOB or used to) once she has cleared the balances from other cards to 0% ones.

Of course this all depends on what she has and what she can get. BUT consolidation is a dangerous game to play as it results in you having available credit which tends to get run up again so whichever route she takes she will need to be very strict with herself and NOT spend on cards (or at least not those that have balances transferred to them)

The snowball calculator at www.whatsthecost.co.uk willl hlep you to see the impact of interest and also to see how long she will take to pay off at her current rate. BUT if you do go down the card juggling route it is important to remember that there is generally a 3% fee for the transfer and this needs to be factored into any decision.

Has she done a SOA (statement of affairs) this will also help to identify more cash that she might be able to free up to go towards cards - there is a calculator at www.makesenseofcards.com

If she does this and then posts it up here we can help her find the extra cash which can then be hurled towards the debt.

MrsTinks

Only go for the 0% option!
Unless your GF has cast iron selfcontrol then it's too tempting to run more debts up again if she consolidates...
DO NOT ABSOLUTELY NOT add it to the mortgage - it will long term cost her a fortune and you should NEVER make any unsecured debt into a secured debt unless you have absolutely no choice...

Why not do a full SOA on here of her finances (with her persmission) and then we can see if she can cut back in places to increase her repayments
With 7 cards :eek: she MIGHT struggle to get more cards (especially at 0% - although it could be worth applying for life of balance cards...) so it could be worth looking at snowballing (someone will be along with a link in a sec I am sure I'm on a work pc so no links saved lol) with what spare cash there is at the moment

Pollycat

Hi there and welcome
Here's the link for the SOA (Statement of Affairs), by using this template it'll ensure that nothing gets left out.
http://www.makesenseofcards.com/soacalc.html

If you input your GF's debts into here, it'll tell you which debt to concentrate on:
http://www.whatsthecost.com/snowball.aspx?country=uk

These links are from a post at the top of the DFW board which really is worth reading through:
http://forums.moneysavingexpert.com/showthread.html?t=107280

Pollycat

poorandindenial
SNAP!

You've obviously got faster fingers than me!

NiceCuppaTea_2

Wow, wasn't sure if anyone was going to respond at all let alone so quickly! Thanks very much so far, am going to look into whats been mentioned tonight. If i could guarantee with 100% certainty that temptation to spend after consolidating the debts and paying them off with a loan would not be an issue, would it still be a bad idea?

OK heres a breakdown of the debt:

1. Barclays Platinum Visa Card @ 19.9% - £4,796

2. Barclays Platinum Master Card @ 12.9% - £872

3. Barclays Connect Debit Account @ .01% - £1,335 OD

4. Virgin Card @ 1.8% - £1,658

5. Halifax One Card @ 9.93% - £1,480

6. Debenhams Card @ 29.9% - £330

7. Outfit Card @ 29.9% - £200

Total: £10,671

Aplogies for initially stating 7 credit cards, its only(!) 6 as one is a debit account but overdrawn. Her salary goes into a Nationwide account and is just about in the black after paying everything off and general living costs each month. Should probably add that ony 1 of the above accounts is used - the Barclays Platinum with £4,796 on it.

Pollycat

NiceCuppaTea wrote: »

Wow, wasn't sure if anyone was going to respond at all let alone so quickly! Thanks very much so far, am going to look into whats been mentioned tonight. If i could guarantee with 100% certainty that temptation to spend after consolidating the debts and paying them off with a loan would not be an issue, would it still be a bad idea?

OK heres a breakdown of the debt:

1. Barclays Platinum Visa Card @ 19.9% - £4,796

2. Barclays Platinum Master Card @ 12.9% - £872

3. Barclays Connect Debit Account @ .01% - £1,335 OD

4. Virgin Card @ 1.8% - £1,658

5. Halifax One Card @ 9.93% - £1,480

6. Debenhams Card @ 29.9% - £330

7. Outfit Card @ 29.9% - £200

Total: £10,671

Aplogies for initially stating 7 credit cards, its only(!) 6 as one is a debit account but overdrawn. Her salary goes into a Nationwide account and is just about in the black after paying everything off and general living costs each month. Should probably add that ony 1 of the above accounts is used - the Barclays Platinum with £4,796 on it.

Why is your GF using the credit card that is one of the highest in interest rates?
She'd be better off using the card that has the lowest interest rate - assuming that she has the credit limit available.

Regards

poorandindenial

OK, is £400 the most that she can pay??? Can she afford to pay it?

If she is still using a card it would imply that she might not be able to actually afford that amount although at £400 a month this isn't going to go down very fast.

I really would recommend that she puts together a full statement of affairs to see where she is actually at and whether she can perhaps free up a bit more to lob at these. The debenhams and outfit cards are small but have a high rate of interest, throwing cash at these could see them gone soon and make life a bit easier.

I didn't really think about what it was costing me to get a coffee and croissant on the way to work each morning but it was really chewing through my money. The odd £3 spent here and there adds up to loads over the course of a month/year and a great motivator to free up more cash is the snowball calculator that I linked to.

bargainbetty

It would probably be best to throw every spare penny at the highest ones - the store cards, and cut them up for good measure.

If she has spare balances, could she shuffle the money to clear a card, and then ask that provider for the best balance transfer rate she can get... clear the highest first etc.

It'll save on the interest in the long run, but the important thing is to not add any more, and cut them up as she goes!

Good luck x