on low income, would like lower interest rate

clairemagnolia

Hi, I've just joined, sorry if this question has been asked before.

I'm a SAHM, with credit card debt of just under 5k, paying off £200 a month, but the apr is a whopping 34.9% with MBNA visa. (Interest every month is over £100.) I've asked them nicely on several occasions for a more reasonable rate, but no luck.

I currently have a part time job, paying £240 per month plus income from child benefit/tax credit of £260 per month.

My finances are completely separate from my husband who pays mortgage/bills etc, but has his own credit cards to worry about.

Am I stuck with this rate, or is there a company who will give me a lower rate despite my low income? I would be grateful for any suggestions on this matter. Thanks for reading.

Claire

Idiophreak

How's your credit history? If it's OK, either yourself or your husband could apply for a 0% or life-of-balance card.

If your rating's a little wobbly, you're best off going to your bank either for a CC or for a personal loan, which should be at a much better rate than 35%, anyway...

thriftymomma

I would suggest looking at a loan if MBNA won't reduce the apr for you. You will certainly be able to get a better rate than that. Alternatively perhaps a a card at 0% could help you shift it?

clairemagnolia

Thanks for your quick responses, Thriftymomma and Idiophreak..

I'm pretty sure I have a good credit history, I always pay on time and at least the minimum payment.

The problem with applying for new credit, either 0% or life-of-balance, is that I don't seem to meet the required threshold for income - this is usually at least £10, 000 I think for most cards? My annual income is approx £6,000.

I'm wary about a loan, because you're kind of stuck with a fixed monthly payment, with penalties if you want to pay off early, but doubtless I would save money in the long run!

Thanks for your suggestions, I will have a word with my bank to see if they can give me any cheaper options.

Claire

thriftymomma

Honestly you would save money in the long run. Type in google for a loan calculator. There is a good one in the top three answers.
Type in how much you owe and how many years realistically you would like to pay for. There will be a total charge for credit which will be massive at 34.9%. Get a loan at say 10% and you could be looking at saving thousands!

Results

Amount per repayment (£) 126.81
Total paid over the life of the loan (£) 6087.02
Total interest paid during loan (£) 1087.02


That is paying at 10%. loan over 48 months.


Now to look at what it would be if you carry on with your credit card over the same period., however the apr would be a massively bigger amout at 34%. Again, 48 equal monthly payments.

Results

Amount per repayment (£) 191.85
Total paid over the life of the loan (£) 9208.61
Total interest paid during loan (£) 4208.61



The apr makes all the difference see. So you could be debt free in 4 years. With the card paying 4 grand interest or a loan paying one thousand pounds worth of interest. Also getting a loan to do it "makes" you do it whereas unless you are very disciplined, its easy to say with a credit card, oh i'll just pay the minimum this month and add a bit extra next month, but next month never happens if you get what I mean. Anyway, have gone on enough LOL. Hope it was a little bit useful.
Look up the loan calculators yourself and have a play with some figures. :-)

thriftymomma

Oh and to look at it another way, if you are paying interest of £100 each month, every year, your credit card is costing you £1200 just to have it there.

I know that was something that took me a while to get my lightbulb moment with. Good louck with whatever you do xx

thriftymomma

posted in the wrong thread. oops!

clairemagnolia

Thriftymomma, I totally see what you're saying. In black and white it is so stark! I know I could realistically pay this off in 3 years, paying £160 per month at 9.9%, according to the quick look I had at the Barclaycard website.

I started to fill in the online application for my own bank (Abbey), but I came up against a wall where it states you need to be working 16 hours per week, unfortunately at the moment I only work 10-12 hours per week and this isn't likely to change.

Would it be worth speaking to an advisor in the bank rather than filling in the online form and risk being turned down - and getting a potential black mark on my credit rating? Is there a chance they will offer me a loan, even if it is at a slightly higher interest rate? (The one Abbey advertised was 8.9%) Do they use discretion regarding people's personal circumstances and what they can afford to pay?

Sorry for all the questions, and thanks so much for all your help so far. Now I can see the possibility of not paying such a huge wad in interest every month and of paying off the debt more quickly, the desire to sort this thing out more in my favour (and giving two fingers to MBNA in the process), is getting stronger, but I'm just terrified of being turned down, iyswim.

cifpower

I would choose the Tesco Card. It offers 14 months @ 0% and I can't see any minimum income threshold

http://www.tescofinance.com/personal/finance/finance/creditcards/index.jsp