Loan/Credit card advice

heatherberry2009

Hi there,

I am hoping someone can advise me on the options I have at the moment. I am trying to get debt free but have a credit card and overdraft that are costing me a lot of money which means I am only making minimum payments and not clearing any debt. I had a reasonable rate on my credit card but the bank suddenly hiked it up and also changed the way they charged for overdrafts so I am paying over double what I used to, along with a sudden expense I have found that I am not able to clear anything much. I have transferred some debt to a 0% card (balance is just under £3000) and have a £1000 overdraft and £4500 on the high rate credit card.

What I was thinking about was trying to get a low rate loan so I have set amount going out each month and can get rid of my overdraft and a chunk of my credit card and this would still allow me to pay a decent amount to the remaining balance.

I am wanting to borrow £5000 over 3 years. Does this sound like a good idea or should I be looking at a DMP? I have been reading through this site and various compare websites and A&L have a really good rate.

I am a home owner, have not missed any payments for anything in the last 6 years and also pay everything on time - would I be a good candidate for a loan?

Any advice would be gratefully received.

Cheers

Heather

Hannah_10

You'd probably get a secured loan, but if you look at Martin Lewis' advice that's the worst possible thing you could do as you're moving from a position of security to one where you could be made homeless. Taking out further credit is rarely the answer too as it doesn't address how you came by the debt in the first place (often people are finding they need just a little more each month than they recieve and so debts kind of grow from nowhere with nothing big to show for it). A DMP again might be the way to go, but we can't tell without a bit more information. The other option that hasn't yet been mentioned is snowballing, but we'll come to that in due course too...

Your best next step would be to do a SOA (statement of affairs) which will help you, us and any lenders to see what your cash flow situation looks like and we ought to be able to help more from there. You'll find what you need to know to do an SOA on the link below.

https://forums.moneysavingexpert.com/discussion/107280

dancingfairy

You might be able to refuse the rate jack. I'm not sure how many days from when they notice the rate is shooting up you have to complain in but there is a letter you can send I think, saying that you don't accept the new interest rate (or something like that) and as long as you don't put any further debt on the card you can continue to pay the card off at the old interest rate.
This might help you?
Edit: see link for Martin's article on how to beat rate jacking
http://www.moneysavingexpert.com/reclaim/credit-card-interest-rate-increases
df

dancingfairy

Argggh - home loan is not really a good idea - with unsecured debts the debt collectors have certain powers but with secured loans - default on them and you could lose your home. There are better ways of sorting this out than getting a secured loan.
I would contact one of the charities Martin recommends - like CCCS or National Debtline or your local CAB.
Good Luck
df

heatherberry2009

Thanks very much for getting back to me. I came into debt in the first place mostly because of funeral costs and solicitors fees and circumstances from this (this was the unforseen expense I mentioned) but I also had a credit card balance from being young and stupid. The person I spoke to at A&L said it would be a personal loan which I thought was different from a secured loan and I will definately avoid it if that's the case. I just felt that now that I am very thrifty with my money and have made big lifestyle changes (walking to work, packed lunch, quit smoking and second job) that a loan would be good as I would have set payments each month and know exactly how much I had left of my wage to put to clearing the rest of my card.

I have just had a look at the snowballing link and statement of affairs which was good to do. unfortunately it was about 10 months ago that my rate was jacked up and it didnt even cross my mind to challenge it - really wish I had came on this site sooner.

Thanks again for your help, it really is much appreciated.

dancingfairy

Well the answer to that very much depends on you really. All I can say is many, many people come on here having got a loan to clear a credit card or 2 and an overdraft, then the cards are clear, they have more 'spare' money the cards get used, they get another loan , a bigger one etc etc.
On the other hand if you have turned the corner and genuinely believe that you won't run up more debt (which it sounds like you might fit into this category with the funeral expenses etc having caused some of the problems) then it might be worth doing aslong you know exactly how much it will cost you over the life of the loan with all the interest etc included. It obviously also is dependent on whether you can get a decent deal.
The choice is yours .....
Good Luck with whatever you decide.
df

goingforward_3

Ok well the one of the reasons i am about to start a DMP is because twice we got out loans to clear our cards but then spent on the cards again which then meant we not only had loan payments but credit cards payments aswell.

Fortunatly we never took out a secured loan though.

If you are able to cut up the cards and never use the overdraft then a loan is probably a good idea, but if you arent 100% sure you can do this then think very carefully about taking the loan out.

Monkeyballs

Hi Heather,

Do you have a Credit Union near you? Only I recently joined my local and they are being really good and are contacting my creditors to negotiate a settlement. It won't effect my credit rating as it's a joint and final agreement.

The rates are pretty good and the repayments (although it's down to them ultimately) can be spread over 5 years...

Just a thought?

Regards,

MFWannabe

We need more information to be able to give proper advice really.
You need to post an soa so that we know your income; amount of money owed; apr's etc

Then we can see where you can make savings and how to pay these cards off quicker.

I wouldn't recommend a loan as you may still be tempted to spend on cards and overdraft.

Post your soa and then we have a better picture of your circumstances