What would be the best solution to clear my debt?

Ned

I accrued a 4k credit card while i was away travelling for two years. I had planned to do a balance transfer on my return, but due to having an 'untraceable history' due to being outside of the UK for so long, I am unable to get a credit card anywhere.

I'm also currently unemployed, and while i was away i missed the odd payment, both of which aren't helping my cause. I'm paying off about 90 a month while my interest is around 70 a month, so im spending lots and not really getting anywhere.

My mum was at the bank today (we're both with LloydsTSB) discussing savings options and also mentioned my situation in order to see what the best option would be. They suggested a 5k loan over 4 years, using 1k to be immediately paid off (the rates on a 5k loan are better than a 4k loan). My mum would take out the loan, and i'd be paying her back each month.

I've suggested that if my mum would like to help, then she could get a credit card (she has a good history) with 18 months free on balance transfers, then i could transfer my debt to her card, therefore paying no interest for 18 months compared to the loan. She isn't too keen on getting another credit card though and would rather go through with a loan.

What would be the best option in this situation? Or is there another way?

Thanks

Fang_3

Don't do it. What if you don't make a payment, then your mother is stuck with a loan?

RAS

The bank want to make moey, not help you clear your debt. Don't.

csarina

Do Not do it!!! Its too easy not to make a payment to your Mum and they will chase her for the debt not you. The Bank should not have given her that advice.

You need to post an SOA so people can advise you where you might make savings to pay off your debit, your first action should be to cut up the card and not spend any more on it.

There will be others along later to give your more advice, but all of them will tell you NOT to allow your mother to take a loan for your credit card debt.

barbiedoll

No, no, no...it's rarely a good idea to replace one debt with another. If your mother has to take out the loan, plus you've missed payments on your credit card, your credit history is clearly shot at the moment. You'd be better off writing to the credit card people, explaining that you are currently unemployed and ask if you can get your account frozen (interest and charges stopped) and a repayment plan set up. Make sure that you only agree to an amount that you can afford, it's unlikely that they will refuse, although they may huff and puff a bit at first. Don't put your mother in debt because of your spending, the other posters are right, the bank is only after making a profit, that's why they won't give the loan to you, you're too much of a risk. Post your SOA and we can give you advice on how to manage your spending and how to repay YOUR debt.

Ned

Thanks for the replies!

I'm on JSA at the moment, living at home, so my income is about 260 a month. 100 of that goes towards my credit card, and a tenner towards a student overdraft (with Natwest) im also paying off. I give my mum some money each week towards rent/food etc.. and the rest im putting aside so i can move out of the area and actually find a job! (Hopefully this will be in the next few weeks).

My sister has suggested contacting citizens advice, as they can contact my banks and come up with a payment plan (or so im told). Is that right?

Ned

Also, I havent used the credit card for at least 18 months, and I dont intend on using one ever again..!

RAS

Right

if the credit card interest rate has gone up at all and you have not spent on the card, you can close the account and insist on paying the old rate of interest. Might be a bit late, but worth arguing with them.

Your sister is right but you can also ask, CAP, CCCS or NDL to do the same thing for you. Avoid fee charging companies.

fatbelly

Ned wrote: »

My mum was at the bank today (we're both with LloydsTSB) discussing savings options and also mentioned my situation in order to see what the best option would be. They suggested a 5k loan over 4 years, using 1k to be immediately paid off (the rates on a 5k loan are better than a 4k loan). My mum would take out the loan, and i'd be paying her back each month.

I thought Lloyds had improved, but obviously not. Awful advice.

Ned

so the loan is a definite no-no. can i do a balance transfer to a credit card that is in my mums name? or would it have to be in my name? obviously i'd set up a d/d to guarantee she is never chased by the bank.

if not, im guessing talking to the bank and seeing what solution they can come up with would be the next best idea?

Marisco

Hi Ned, to be honest I'd leave your mum out of it altogether. With the best will in the world all sorts could happen, and your mum might then be "lumbered" which could badly affect her credit rating. I'd write to the bank, explaining your situation and see if you can come to arrangement with them. Point out that you are on JSA, and can only pay very little for the time being, but will increase the payments when you start working. Also if the CC is with Lloyds, I'd open a basic bank a/c with another bank that has no ties to Lloyds, and get your JSA - and later wages - paid into that. It then avoids the possibility that Lloyds will "offset" (where they grab what they want from your a/c to pay your debt:mad:) it's perfectly legal, but can cause no end of problems for people!! Good luck.