Large CC debt, Stuck on High rate, Help

carlw

Hi

I have posted before, I am trying to help my brother sort out his finances. He is a head in the sand, not open his post kind of guy. So I have really had to start from the bottom up.

I have organised his finances so we now know all his income and expenditure, and his debtors and creditors.

I’ve got him to move his DDs so they come out just after payday, not just before, as they were bouncing every month, and he now realises how much he has to spend and hopefully he will pay more attention to his account balance.

I now want to help him reduce his credit card and overdraft. He has an MBNA credit card with a balance of about £12,600 for which he has only paid the minimum payment for about 5 years and only stopped spending in September so it’s gone nowhere. The rate is something like 27% so he pays about £300 a month for it to hardly reduce.

His credit rating must be awful, as he has had DDs bounce every month for ages, so he won’t have an option to transfer to one or more lower rate cards. He also would have just ignored all of the rate increase letters, so he is too late to refuse the rate increases.

Other than increase the amount he pays, how can he get the cost of this debt reduced so his payments are having a bigger affect at reducing the outstanding balance? Any help or suggestions would be appreciated.

I am already in the process of looking at reclaiming Bank & Credit card charges, and checking if he has PPI.

Many thanks

[Deleted User]

Hi,
Not sure what you are asking here - if he can't switch to a lower rate card, and it's too late to refuse rate rises, then his only option is to over pay to reduce outstanding balance. Definately investigate reclaiming charges.

If he is struggling with his monthly payments he could do a DMP, or alternative - best to contact one of the debt charities (CCS, National Debtline, CAB) for advice here (they may be able to help get interest reduced/frozen, and will hopefully get lower monthly payments accepted), given that his credit report is already in trouble, there may not be much further damage that this route could make.

A good place to start on this forum is with a SOA http://www.makesenseofcards.com/soacalc.html
This will give people a better idea of his siuation and will be able to advise/comment accordingly.

D9

carlw

I have done an SOA with him, and am quite comportable sorting all of that myself for him, as i know what i can get reduced and what he can do without.

He is paying roughly £300 a month off against the MBNA card already and can afford this, leaving him enough to live on. Im switching him from minimum payments to a fixed £300 a month already. which will reduce the balance quick but still not very quickly.

My question really just relates to the rate of the card, 27% seem extortionate. He is stuck on a really high rate with nowhere to go. I could borrow 12.5k at a third of that rate via a loan or 2 or 3 zero % credit cards. I don’t expect him to be able to because of his history he is clearly a risk to any lender. But i wondered if MBNA were obliged to assist him in reducing his debt or if they are very unlikely to help. Is another lender likely to give him a loan at a lower rate to clear the credit card and reduce it quicker. Or is he simply stuck?

Many thanks

[Deleted User]

As you have said yourself - the company has set the rate based on the risk your brother poses. They are a business with their goal to make money - they are under no obligation to reduce the APR.

If he were unable to make payments he could go onto a DMP, or alternative (as this is not the case, it's not appropriate)

If you are able to borow the money for less (lower APR), then the only other option to paying it off as he currently is, would be for you to borrow the moeny, pay of the debt and your brother pay you back.

If this is an option you are considering you have to weigh up all your options. As you would become the person liable for the debt and not your brother, could you afford to (and be prepared to) pay it back if your brother stopped paying for whatever reason? Would this cause a strain on your relationship? Are these risks you are prepared to take?

D9

Tixy

MBNA can continue to charge this APR and are not obliged to do anything. Occasionally people have found that by calling a credit card company they will sometimes agree to an informal arrangement eg to charge lower or no interest for 6months without it affecting his credit file. This is not common but I have seen some people successful with this approach. Another option might be to ask if they would drop the APR a little.

The downside of either of these might be instead that they decide to rate jack his card further once they realise he may be having financial difficulties - he needs to watch out for this and be ready to reject any rate rise they propose.

27% seems high but is not particularly uncommon these days for a person with a poor credit file.

carlw

Thanks for your help, hes my brother and i want to help him as much as i can. Im not sure i could get a loan on his behalf though, as it will make it harder for me to move house in the next few years with a large loan sitting on my account, which is what i am saving for at the moment.

Ill feel i have help enough, if i can get him organised and on his way to clearing it the best way possible. Plus he will learn the consequences much better than someone paying it off for him.

Im going to claim back what i can and reduce the balance this way, set up a regular payment, and speak to them to see if they can freeze or reduce the rate for a period of time.

Ill keep an eye out for him for a while to make sure hes not going off track or ignoring important letters and hopefully ill have him sorted soon.