£20k of Credit card debt

daisy164

Hi

I'm not sure if this is the correct place to post this query so apologies if not.

My husband and I have run up £20,000 worth of credit card debt over the past ten years, something that we really regret. I cannot even justify it, we have just lived well beyond our means. The naivety of youth could be blamed!

We now realise the error of our ways and want to deal with this in the best possible way. We have a young family now so I only work part time (feel full time would be very difficult as have to meet higher childcare costs if work full time and have no family to help). I have arranged our finances so that my wages, tax credits and nursery costs are all maximised in the best possible way (all above board I must add!)

We have never missed a repayment on the credit cards but can only afford just above the minimum payment each month. This costs us around £470 per month. It worries me how long this will take to pay off.

I am considering the possibility of taking out a £20k loan to pay them all off and then cutting them all up. A quick look tells me we can get an 8.8% loan over 20 years with repayments of £174 per month. We need to accept that we have this debt and it won't go away so need to find the best way to sort it out.

I need some advice though, is this the best thing to do or am I just going to "shift" the problem.

Any advice would be greatly appreciated.

Many thanks

LeeSouthEast

Do you really want to be saddled paying this back over 20 years? During that time, you'll pay £23,213.00 in interest alone, on top of the £20,000 you originally borrow.

You'd be debt free by June 2030 (249 months) (if you did it this month).

If you throw £500 at your cards (you don't mention the APRs so I guestimated 19.9% as a rough guide) you'd pay 'only' £12,145.00 in interest and be debt free by February 2015.

You can play around with your own numbers here:
http://www.whatsthecost.com/snowball.aspx

Consolidation at a lower rate over a much longer period is very, very rarely the answer.

mandy_s_2

Is moving any of the debt to a 0% or low interest credit card an option? Maybe you should go on the debt free wannabe board and post a statement of affairs

nearlyrich

DFW is the place for advice on how to tackle this so I have moved your post, good luck and welcome to MSE..

MyLastFiver

Hi, taking out a 20 year loan is madness. Could you post an SOA (template in a sticky at the top of this board) and we can give you some specific advice.

daisy164

Thanks for the "whats the cost" link. I have just had a look at it and it is very useful and provides some light at the end of the tunnel.


I'm new to this forum so not sure what an SOA is?

wornoutmumoftwo

SOA is a statement of account, a list of all your income and expenditure.

BADPENNY_2

dont do it. Speaking from expierience, me and my other half took out a 20k loan to consolidate our credit card debt, then because we hadn't looked at the reasons how and why we where overspending ended up using our credit cards again so now owe the repayments on our loan plus aprox 15k on credit cards. as the above poster says it would be better to try and throw as much as you can at the cards each month and repay over a shorter period of time.

good luck.

daisy164

You'll have to help me out folks, how do I add a sticky so I can put an SOA on? I'm looking but not seeing!

brokemedic

Do not consolidate.

I did and it's the worst thing I could have done in regards to my debt. Post up a SOA, reduce outgoings, figure out the root cause of your overspending and chip away at the debts.

I am now left with debts and a consolidation loan and in my case consolidating didn't make me tackle the cause of my overspending. It just increased my overall debt.

Do not consolidate.

daisy164

Ok, heres what we have coming in and going out each month:

Incomings

My salary: £850
Husbands salary: £1525
Family Credit: £132.80
Child Tax Credit: £730


Outgoings

Mortgage: £584
Bank Loan: £212
Sky: £82
Gas: £46
TV Licence: £10.14
Electricity: £70
House Insurance: £34
Car Insurance:£ 75 (have and need 2 cars)
Credit Card Repayments: £450
Sharesave: £30
Dental Plan: £13.99
Boiler breakdown cover: £12.50
Savings: £80 (to cover xmas, birthdays, emergencies)
Mobile: £35
Pet Insurance: £15
Water: £31
Council Tax: £110
Kids trust funds: £40
Childcare: £700 (will shortly be getting 2 x £243 childcare vouchers deducted from our income above to cover this so should save a little on tax and NI)
Pension: £20
Shopping: £270
Petrol: £150
Store Cards: £84 (only a couple of balances, will be clear in 2 months)

Credit card debts are across 5 different cards with balances ranging from £9200 to £1500.

Feel free to scrutinise and critisize, really appreciate the outside view on all this as desperately want to be debt free in the best possible way.

Thanks