Help me help my friend!!

mjgreen60

Hi all,

Am after some advice for one of my friends.

Have just been talking to her about her credit card debts - they seem to be escalating!!

To put it briefly, she has about 2700 on a 14.4% APR (currently paying approx £115/month), 5200 on 16% APR (approx £135/month)and (wait for it...) 9800 on 23.9% (approx £250/month)!!!:eek:

She has finally come to terms with the fact that something needs to be done. She is paying more than just the interest per month but is going to take her over 6 years to clear the debt!!

I have so far come up with 3 choices.

1. Move the largest amount to a 0% card for 15 months and keep paying the other 2 as is for now.

2. Try and get a long term low fixed rate card and move as much onto it as the credit limit will allow.

3. Take out a loan over 3-4 years for the total amount for the 3 cards and just keep up with the payments and all be clear in a few years.

She always makes the payments and doesn't default but I'm sure you will all agree that the situation needs addressing!!

I would be really grateful for any suggestions on the above ideas or any other options people can suggest.

Many thanks

catmiaow

Perhaps see if you get her to give you info for an SOA, if you post this then I am sure we will be able to help more

MrsTinks

SOA - need to see if she can cut back to overpay or not really And you need to find out where the money went... no point resolving the debt issue if she only goes and blows it on new clothes or a handbag addiction again

Horace

Dont advise her to get a loan to pay off the debts either as that will make things worse - she needs to address how she got into debt in the first place and as MrsTine has suggested it could be a handbag or shoe addiction. Maybe you should try and encourage her to visit MSE and maybe post her SOA so that we can assist more.

DarkConvict

Loans are a bad idea, by reducing monthly outgoings on debts people mentally spend more money on other things instead of paying more of debts... or get more credit. Either way they end up in a worse position.

Getting the cards on a lower rate is what she needs, can see ask for an extension to the limits on the first two cards, and try and bring some of the balence over.

Also, to protect the rate of interest she is paying off, she needs to stop occurring new purchases, basically stop spending on the card. This applies to 0% and balance transfers due to the order in which the balance is paid off. The balance lowest rate is paid first. £300 (£100 balance transfer 0% apr, £100 new purchase 17.9% apr, £100 cash advance 30% apr) If you pay £150, there is £50 left on new purchase and £100 on the cash advance. Thus you incur interest.

Intergalactic_Floozie

I couldn't recommend getting her to keep a spending diary highly enough!

I work out what I've got coming in over the month from wages / benefits etc Deduct the cost of all my direct debits.

Then I move the available money into another bank account.

Then I deduct in cash money that I need for bus fare, kids activities, school dinners and newspaper bills and put that in a cupboard.

Then whatever is left stays in the bank and is split into three categories. Groceries, petrol & everything else.

I then write in my diary how much cash is in my purse + what's in the bank.

Then daily write my spends in. Then deduct them from the three budget totals

I can see at a glance how much is left for essentials and how much is left over for frittering.

The above has really helped me to see how much I am spending and on what!

She's obviously got a good friend in you trying to help her out.