Helping a friend with C/C's - Where to start?

izools

I'm sorry but if she has a £67,000 bond she should use that to clear these debts totally and use the income she would otherwise be using for interest payments on these cards to go into a high interest ISA and rebuild from there.

What's the point in having £67,000 earning no more than 5% APR when you are paying four to five times that on your debts? It's absolutely non sensical and a very financially inept thing to do.

Sure, using her other income to pay these a bit at a time means she will have the £67K still to one side, but she can't afford even the minimum repayments withuot chipping into her bond, can she? And the amount that these debts will cost out of her bond over a long period of time will amount to a lot more than if she used what capital she has to clear the debt now and use her new monthly surplus to rebuild an ISA / Investment ISA.


I'll simplify:

Debt: Circa £25,000
Average APR: Circa 20% APR
Interest Charged on £25,000 @ 20% APR every month: £415

Capital of £67,000
Recieving interest of 5% APR = £279 Interest every month

Reducing capital to £42,000

Saves £415 in interest payments to creditors each month, but looses £175 in interest payments on the capital each month.

Ergo clearing her debt would be benefiting her to the tune of at least £240 every month in regards to Net Capital.

Hot_Potato

izools - thank you for your reply. I know the figures, but trying to get my friend to understand or want to understand is another thing!

Any

Hot_Potato wrote: »

!

She also wants to apply for another credit card as she tells me her M&S and John Lewis cards can't be used outside of those shops??? I'm sure they can, but she's insists that they can't! So need to look into another possible credit card that she can use for emergencies!!?

Yes they can both be used outside the shops.
No worry, with missed payments she will not be able to get another card. This is the end of the journey on credit cards front.

Hot_Potato wrote: »

At least I'm doing what I can re the interest freezing. I just hope it's enough!?

Now it's you who is wishful thinking - with her attitude she has no chance of getting out of this mess. Most likely digging deeper.

Any

Izools - another very sensible and thought throu post.:T

Hot_Potato

ok... my friend has had HSBC and Barclaycard come back and say they will not freeze the interest - what now?

Any ideas would be appreciated as I am actually loosing the will to live helping my friend what with her reluctance to want to help herself...

CannyJock

Hot_Potato wrote: »

ok... my friend has had HSBC and Barclaycard come back and say they will not freeze the interest - what now?

Any ideas would be appreciated as I am actually loosing the will to live helping my friend what with her reluctance to want to help herself...

If they won't freeze the interest then apart from transferring the balance elsewhere, the only other option is to pay the card off.

From many, many years of helping friends and family with their finances, I can tell you that you're wasting your time trying to help someone who has no interest in the subject

Unless you do it all for them, they won't. That's what you're getting yourself into. What you need to start asking yourself is if you're actually helping them at all, or is your intervention actually prolonging their current mindset? It's not all doom and gloom though. One of my best successes was helping someone clear £100K of debt over 2 years through refinancing, major money saving tactics and a complete change of lifestyle. They'd already hit rock bottom though, sounds like your trying to keep your friend from hitting it.

Any

Serious spenders are ill the same way as drug users or alcoholics.. They have to want to help themselves!!

bengal-stripe

Hot_Potato wrote: »

ok... my friend has had HSBC and Barclaycard come back and say they will not freeze the interest........

Why should they? - Your friend can hardly plead poverty or financial hardship.
She obviously has the means, but not the will, to get her (financial) house into order.

If I were you, I would walk away, until the day your friend is ready for your help.

CannyJock

If you're determined to persevere, then it might be worth speaking to Natwest about a balance transfer offer as she's got a decent amount of remaining balance with them. Natwest will let you BT up to 95% of limit onto the card

I'm thinking an offer to transfer the balances from Barclaycard could clear them in full.

So instead of:
Natwest 5157.68 @ 18.30%
Barclaycard 5250.44 @ 22.90%

Natwest 4392.02 @ 17.50%
Barclaycard 6666.14 @ 22.90%

She would have (assuming 3% fee and that balances have come down sufficiently to allow full amounts)

Natwest 5157.68 @ 18.30%

---

5407.95 @ 0%

Natwest 4392.02 @ 17.50%

---

6866.12 @ 0%

Once the Barclaycards are clear, they become potential candidates for 6.9% LOB offers.

You haven't actually cut them up and returned them have you?

Hot_Potato

Thank you so much for all your patience.... I do appreciate it - honestly!

I do not blame the CC companies at all for not freezing the interest, but it was worth a shot. I was just wondering if (before rolling over to them) whether there was anything else that could be done.

I have cut up the five cards and sent them back...

Yesterday I applied for a card with MBNA (5.6% plus 1.5% fee) to transfer something across to it... she was granted the card and given £5,600 limit. I've told her I'm cutting up the card as soon as it arrives.

I found out today that she has a £2k overdraft with Barclays, who phoned her recently offering an 8% loan to clear it...

I feel I'm starting to drown, as my friend insists that she applies for another card for spending on (a 0% for emergencies....) even though I am trying to get through to her that she can use her John Lewis and M&S cards...

CannyJock - please can you explain what you mean by 'Once the Barclaycards are clear, they become potential candidates for 6.9% LOB offers.'