Thinking of getting a loan to clear Credit Cards

stanm

Hi,

This is my first time posting so apologies in advance if I'm posting in the wrong section!

I'm thinking of getting a loan to clear some credit card debts that I ran up whilst being a student and starting out in my job.

I currently have four credit cards on which i pay a totla of £278.10 each month (minimum payment) and cover the interest and not much else.

Details are:

Barclaycard: £147.14 19.9% APR
Mint: £1,166 .87 23.29% APR
BOS: £3,390 25.95% APR
EGG: £4,653.61 21.6% APR

I'm aiming to clear the mint and barclaycard amounts in the next two months (usingsavings and pay checks)... reducing the outstanding amout to £8043.

I was thinking of getting an unsecured loan of £8000 to clear the rest... looking at a repayment window of 4 years.

I've done some background reading and know to avoid the PPI scam etc.. i've looked at my bank and they could offer me a rate of 11.5 -13.5 p.a. and possibly a payment holiday of two months at the start... giving me time to knock the outstanding totals down a bit further.

My personla situation is that I currently rent, have a good job and also now manage to save money each month and would look to continue to do so whilst paying off the loan... aiming to get a deposit together to buy in by the time the loan is paid off.

I guess i'm just looking for advice on whether or not this is the right thing for me to do... i've rushed decisions in the past and... well, see above.


Thanks,

S

drbesty

I'd use the money you've saved to pay down the cards starting with the one with the biggest outstanding balance

CLAPTON

in general it makes no real sense to save at 3% and borrow at 11.5% or even at 25%
so in general it's best to use savings to pay off debt.

although it might be pschologically satisfying to clear a card, the most cost effective way to pay debts off is to pay as much as possible on the debt with the highest APR. That way you pay the least interest and clear the debts in the shortest time.
Even though not totally the the cost efffective, it is better to pay a little more than the minimum monthly payment on each card as the credit records are now recording whether you pay the minimum or more.

Whether to get a loan and pay the CC off? in general its a good idea to reduce the overall APR you are paying as long as you dont then run up new debts on the CCs.
So see whether they actually offer you a decent rate loan, then pay off the CCs then save as much as possible and settle the loan asap from those savings or overpay if the loan allows this.
Do continue to use some of the CCs but set up DDs to pay in full each month; this will stop you running up new debts but will also look good on your credit record for when you apply for a mortgage.

Coveredinbees!!!!

What you could try is paying off the Barclaycard and then ring them to say you want to cancel the card. What may then happen is the will pass you over to an accounts retention person who will offer you various deals to keep you as a customer. What you need to do is keep telling them you want to cancel until they offer you a low rate or zero rate balance transfer. If they do this transfer as much as you can from the highest rate card you have over to this one. Hopefully this may clear that card off and you can try again with that card. Worst case is they will just cancel the card but if they do what have you lost.

stanm

Hi,

Just wanted to say thanks for all the advice, I think i'm going to pay off as much as i can over the coming months - trying the retention thing with the Barclaycard - then see wher is stand in a couple of months and make a final decision. Goes without saying that i'll be throwing as much money as possible at the high APR cards.

Thanks again!

S