How can I get out of this expensive credit trap?

cbeffer

Can anyone advise me where to go?

Me and my partner have built up credit card debts of £35,000 (ouch!) - totally our fault but we are really determined to get a grip on it and want to put these on a cheaper loan if possible. At the moment we're paying nearly £1,000 in minimum payments each month!

We're lucky in that we have good jobs and at least 25% equity in our jointly mortgaged house and we have no arrears or missed payments. The problem is that although we have a good credit record we cant seem to get a loan to roll the credit card debt into one because of the size of our existing debt! A sort of chicken-and-egg situation.

We can't increase our Halifax mortgage any more because our loan-income ratio is at a maximum. We also tried to get a secured loan for £35,000 from Nemo, but were knocked us back as our income came in just below their requirements. This seems crazy as our new monthly payment (if we had been accepted) would be way below what we're already paying in minimum credit card payments.

I obviously dont want to risk making other applications, get knocked back, and thereby harm our credit rating.

I know the credit crunch has hit hard surely there must be some lender out there with a brain, and I'd be quite happy for the loan to be paid directly to the credit card companies!

Does anyone have any ideas?

Thanks!

System

cbeffer wrote: »

Can anyone advise me where to go?

Me and my partner have built up credit card debts of £35,000 (ouch!) - totally our fault but we are really determined to get a grip on it and want to put these on a cheaper loan if possible. At the moment we're paying nearly £1,000 in minimum payments each month!

We're lucky in that we have good jobs and at least 25% equity in our jointly mortgaged house and we have no arrears or missed payments. The problem is that although we have a good credit record we cant seem to get a loan to roll the credit card debt into one because of the size of our existing debt! A sort of chicken-and-egg situation.

We can't increase our Halifax mortgage any more because our loan-income ratio is at a maximum. We also tried to get a secured loan for £35,000 from Nemo, but were knocked us back as our income came in just below their requirements. This seems crazy as our new monthly payment (if we had been accepted) would be way below what we're already paying in minimum credit card payments.

I obviously dont want to risk making other applications, get knocked back, and thereby harm our credit rating.

I know the credit crunch has hit hard surely there must be some lender out there with a brain, and I'd be quite happy for the loan to be paid directly to the credit card companies!

Does anyone have any ideas?

Thanks!

Welcome along cbeffer!

First thing's first - people on here always ask to see a full Statement of Affairs (SOA) in order that the full picture can be seen before advice is doled out.

http://www.makesenseofcards.com/soacalc.html

But from your initial posting it sounds like consolidation isn't viable (people on here will tell you not to do that anyway, because more often than not people consolidate and then continue to spend on their existing cards, which ends up doubling the debt). So you will have to focus on paying off the highest APR debt first and throw as much at it as you can. Try to get a couple of 0% cards for some of the balance and shift some of the money about.

Be careful about applying for too many credit products in a short space of time as this can hit your credit rating badly. The usual recommendation is for just one every six months, so it sounds like you might have to wait a bit before trying to get an 0% balance transfer card.

Apart from that, try to cut back wherever possible (the SOA will help here) and increase your income if you can (there is a forum for that on this site too).

Good luck!

niccatw

Hi cbeffer

Welcome to the forum :T

I'd echo what in the red has said really.

Perhaps, when it might be safe to make applications again, go for 0% of life of balance cards to bring down the APRs. Luckily Matin's newsletter is always good for tracking the best available ones out there

In the meantime, perhaps play about with the "snowball" calcultaor to see the order in which you can pay off your current credit cards http://www.makesenseofcards.com/snowcalc.html

Good luck

dancingfairy

At least by not getting a secured loan you are not putting your home at extra risk - in the sense that if you had a secured loan and you defaulted for any reason - illness, redundancy, family break up etc then your house could have been at risk -it does kind of make you face up to the problem as well -as many,many people have got a consolidation loan and just kept spending.
I would suggest doing a thorough budget and then getting in contact with one of the debt charities who can talk you through the various options - places to go are National Debtline, CCCS or even your local CAB.
Best of Luck
df

debtdesperado

Definitely do a debt snowball from makesenseofcards so your repayments are making maximum impace, and also make sure that you have the maximum balance on the cheapest cards:

eg if you have £10k balance on a card with a £15k limit at 15%, and another card with £5k at 20%, do a balance transfer to the cheaper card.

If you can't consolidate, phone up all your card companies and ask them for cheaper rates - lay it on thick, you are a good customer, may have to go bankrupt etc etc - you might just find they drop the interest rates.

Another thing to do is in a few months when your credit record has recovered is to try and get a loan for a smaller amount (not the full £35K) and transfer the most expensive card(s) to that. Then redo your debt snowball.

Don't forget, each time you pay off a card, get rid of it.

Another thing is if you have spent that much you must have loads of stuff that you don't need - start ebaying it. You won't get anything like what you paid for it, but it will help to bring your debt mountain down.

Another suggestion I liked from another poster is every day to look at your bank account and round it down to the nearest £10, transferring the difference to a credit card. Painless, and the small amounts really do mount up!