Money maximisation/clearing debt.

BigTone

Hi,

I need some advice, I have been putting in the overtime at work like no-ones business and at the end of this month (Sep) I should have between 3K and 4K which I am going to plough into getting shut of my debt on credit cards.
My situation is;

Barclaycard - Bal £3800 APR 27.90%
MBNA - Bal £2200 APR 24.69%
HSBC - Bal £1200 APR 22.32%
Abbey#1 - Bal £1250 APR 17.16%
Abbey#2 - Bal £800 APR 17.16%
Abbey OD - Bal £1400 (Manage down @ £140pm)

Salary £40k

I have a fair few questions, so if you could bear with me;

Which is the best way to get rid of this debt?

1. Pay off the highest interest rate card, leaving me with 4 cards and apply for a 0% card to shift these to?

or

2. Pay off 3 of the smaller balance cards, leaving me with only two cards but on a higher interest rate?

I have not applied for any credit cards/loans since 20.01.2010 and that was a single application for a abbey zero card, for which I was declined.

I have had a mobile phone contract since, as well as numerous payday loans until about May, all of which I have paid on time and have not missed any payments on anything.

I am however on a "manage down" for my overdraft with Abbey which I pay £140 per month off.

How will this affect my likelihood of acceptance?

Which cards should I go for? dont want to get rejected.

I am going to check my credit file before I do apply to ensure that everything is in order.

Sorry for the long winded post and if you have got this far, thankyou for your interest, any comments/suggestions/ideas, anything, is very much appreciated.

bottleofred

Hi Bigtone,

I would always pay off what's costing the most, which in your case is the Barclaycard, but you may feel better by getting rid of 2 cards with smaller balances, so it's up to you really. You should put a statement of affairs on for people to give advice on how you can save money etc. The link for an SOA is http://www.makesenseofcards.com/soacalc.html
Regarding applying for a zero % card, I wonder if you were declined because you had used up a large amount of your available credit, which can make companies concerned. For example, if you have total credit facilities of say £10000 on all your cards and had balances totalling £8800, you have used 88% of your available credit. You should also check your credit file to make sure there isn't anything on it that there shouldn't be. Regarding your chances of being accepted, these will vary from company to company, but I'd definately pay off and close some accounts before applying for more credit. Also bear in mind it can take 4-6 weeks for your credit file to be updated, so bear this in mind if you decide to reapply.

Good luck in whatever you decide

Red

Lottebear

Have a play with the snow ball calcualator, it is by far the easiest way get your head around things, often it is suprising.

NorthernLas

I would also pay off the highest interest first.

You might find the snowball calculator useful. It will show you how long it will take to pay the cards off so you can see the difference depending on what you choose. Obviously, if you are successful getting a 0%, then interest is less of a problem, but if you are not, you will know where to throw the money.

http://www.whatsthecost.com/snowball.aspx

facing_up_to_it

Hi BigTone, my head agrees with what everyone above has advised but I would be ever so tempted to -
1) clear the three little ones,
2) close the accounts,
3) throw everything you can at the highest rate card between now and next February ( any more overtime available )?
4) then in February check your credit file to make sure the 3 accounts are closed, there shouldn't be any searches on there from last January at that time too,
5) then apply for a zero rate card for the 2 remaining cards you have.
As I said - this is what I'd be so tempted to do but it's probably not the correct way to go!
Best of luck with whatever you decide to do xx

BigTone

Cheers,

Many thanks for your replies and thoughts, I was thinking of getting rid of the smaller cards, therefore just having one or two to "get rid of" but I am still unsure.

What do you think will make me more attractive to future prospective creditors? (For longer term 0% deals?)

BigTone

Had a play around with the snowball calculator.

I am going to clear the highest rate card first then start to work my way down.

14months, here we go.

Cheers all for your advice