10k Debt - Best way to pay off

[Deleted User]

I have 10k of credit card debt which im determined to pay off.

Im looking at consolidating the debt in the form of a load, hopefully as lower rate as possible (Been looking at Sainsbury and Tesco finance).

I had hoped to put all the debt onto 1 card, 0% interest for 12 months and try and pay off as much as possible. Unfortunatly none of the companies Im with will go this high as Im not a home owner.

So I feel a loan is the best option for me.

My question is do I try and pay the loan off as quickly as possible, say 2 years?

Or do I spread it over 5 and keep the payments quite low, the cost of repayment over 5 years is simliar to what I pay each month across all my cards paying the minimum payment each month so I wouldnt really see a difference in the cash going out each month.

Opinions please?

P.S If i dont manage to get a loan from Sainsburys or Tesco who else would you recommend?

Hannah_10

I wouldn't recommend a loan at all to be entirely honest.

There is a reason why you have racked up a debt on credit cards, perhaps it has been a massive life-event, or perhaps (and this is the most common in all honesty) you just aren't quite making everything tie up and bit by bit items end up paid for on the card... Till you owe 10k and aren't sure quite how that happened exactly. As I said the former happens, but the latter is by far and away the most common.

That's why consolidation doesn't work for most of the people that do it, it still leaves the gap between income and expenditure, which leads to using the old cards again, or finding new lines of credit "to get by until payday" or however else you assure yourself it wont be a habit. It is a habit though. There are lots of members here who have consolidated two or even 3 times before coming here and saying "gah this is not working, please tell me how to get out of this".

So, I'm sure other people will suggest loans and how to switch the interest rate down and all sorts of things, but I'm suggesting don't. There is another way and it's less of a quick fix (so far less attractive then) and involves budgetting, maximising your income, minimising your expenditure, and then putting all free funds into debt repayments in the most savvy way until you're clear. Take that route and you will have developed lifelong skills that will keep you out of returning to this situation ever again. Like I said though, it's harder work and not as sexy. It's your choice.

[Deleted User]

In all honesty the debt has followed me around for about the last 6 years or so, debt which was racked up in my younger years.

The cards havent been used for 5 years, and ive basically switched the debt between cards to keep the interest at 0% as often as possible.

Im now at a point where I want to actually pay the debt off, Im in a pretty secure job earning around 35k a year. Now is the time to put this debt to bed.

The difficulty for me has always been paying the debt back, not through lack of funds but through lack of organisation and always thinking ill just switch it to another card in 12 months time and continue paying the min payment.

My thinking is if i have a loan, i'll pay a fixed amount each month all on the same date and i'll actually be paying off the debt.

Question is pay off quickly or slowly?

saltnvinegar

Hi Dan

I totally agree with Hannah. I have done the whole consolidation thing all it did was postpone the inevitable.

If you are in a position to get a personal loan for 10k then I will assume that you have a pretty good credit rating and have been paying your cards on time (even if the minimum amount).

I would suggest posting up your SOA calculations on here and we could look at the possibilities of paying off the credit card (s) without having to take on the burden of a loan and the possibility of paying off the debt even quicker.

SnV

[Deleted User]

What are SOA calculations?

saltnvinegar

Hi Dan

SOA - Statement of Affairs or Income/Expenditure sheets. Have a quick search on the forum and you should find the calculator.

SnV

Fortheloveofmoney

I agree with the above posters. You won't find many fans of consolidation here as most of us have been there and done that. I myself consolidated 3 or 4 times (if I remember correctly) and each time I ran more debt up. The result was £30,000 of debt. I was lucky and managed to stop myself just before I got into serious trouble.

Please learn from our mistakes and know that taking on more debt to pay debt is a really bad idea.

An SOA is a statement of affairs. Basically a list of your incomings and outgoings. A link to the format can be found at the top of this forum.

Hannah_10

For everything you need to know about SOA's read this...

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

[Deleted User]

Thanks guys and gals!

Oneday77

I agree with everyone else don't consolidate.

You say that your never organised to over pay the card, so will you be able to pay a loan off ASAP either.

Since you feel comfortable with your finances do you have any savings. It would be best to sink a chunk of that into the CC and then setup a SO to overpay each month. Lok at it this way if you could pay a £10k loan over 24months + interest(say 8%) That would be a total of £11600 to pay @ £484 a month.
A CC with say 20% interest over 2 years would be £584 a month to clear. It would work out less as interest is added on the remaining balance so it would snowball down. Stick with the CC and reduce the balance every few months to reduce temptation.

Actually 10k at 584 a month would clear in 20 months. Bear in mind my interest figures are guesses.

[Deleted User]

Oneday77 Im slowly coming to the realisation that this seems to be the best route. 2 of the cards are 0% interest for the next 9 months so it gives me 9 months to concentrate on the Egg card at 16% which has £5200 outstanding.

I have about £1000 savings so will be injecting that this month.

Given my current debt its unlikely ill actually be approved for some of the lower interest rate loans anyway.

A couple of years hard work and i should be clear!! Wish me luck.

This is a small consideration but would it be a good idea to consider a break from my pension contributions? Currently about £150 a month?