Debt management

carrieuk

Hi,

I know the old saying goes to never take out more debt in order to pay off other debt but we have a few debts and it seems just difficult to pay off them (not in the sense that we cant afford the repayments i just dont seem to be getting anywhere!)

My credit card - £450 - 24.9% APR
Evans Card - £400 - 24.9% APR
My overdraft - £2000 - 0% interest but come July it will go back to a normal account (its a graduate overdraft at the moment)
My partners CC - £1800

Is it worth taking out a loan with Natwest and pretty much paying off everything so we can manage one payment a month.

At the moment i'm paying just over the minimum payments on all of these but i was just wondering if it would be quicker to clear it that way?

What do you think?

Thanks

Carrie

[Deleted User]

carrieuk wrote: »

Hi,

I know the old saying goes to never take out more debt in order to pay off other debt but we have a few debts and it seems just difficult to pay off them (not in the sense that we cant afford the repayments i just dont seem to be getting anywhere!)

My credit card - £450 - 24.9% APR
Evans Card - £400 - 24.9% APR
My overdraft - £2000 - 0% interest but come July it will go back to a normal account (its a graduate overdraft at the moment)
My partners CC - £1800

Is it worth taking out a loan with Natwest and pretty much paying off everything so we can manage one payment a month.

At the moment i'm paying just over the minimum payments on all of these but i was just wondering if it would be quicker to clear it that way?

What do you think?

Thanks

Carrie

Hi,

It's never recommended on this site to take further credit to pay off credit you already have. It seems quite common that once this is done people re-run up the origional debt leaving them with the consolodation loan as well as cc and o/d debt.

Post a statement of affairs and people will be able to help you identify where cut backs can be made in order to over pay on the debt.

http://www.makesenseofcards.com/soacalc.html

It's best to snowball debts if you have varying APR's.

Unless your partners CC Apr is higher than 24.9%, you would be best paying the minimum's towards everything and paying all the surplus you have from your SOA towards the top two CC's listed and then when these are gone pay towards the next debt that's costing you the most. This way you will minimise the interest you are paying back, and maximise the amount going towards actual debt repayment.

Evans Card - £400 - 24.9% APR
My credit card - £450 - 24.9% APR
My overdraft - £2000 - 0% interest but come July it will go back to a normal account (its a graduate overdraft at the moment) - Am I right in thinking that Natwest stagger this, so that they reduce it over -time? year one £2000 interest free, year 2 £1500, year three £500 (or some other way?) -What will the charge or APR be in July?
My partners CC - £1800 (What's the APR?)

Will be able to make better suggestions if you post an SOA

HTH

D9

katsu

A simple trick you can use to make a small difference with your CCs is to stop using them and then instead of paying by DD, setup a standing order for what the minimum payment was last month - then keep it at the same figure. That is quite good with storecards as it doesn't make much difference to your finances but will help you pay a little more off the balance each month.

Can you pay off one of your cards with either your partner's card or your overdraft? The 24.9 is a really high APR.

What about ebaying stuff you don't need and throwing the money against the high APR cards?

Do post an SOA so we can offer more advice.

DVardysShadow

carrieuk wrote: »

Is it worth taking out a loan with Natwest and pretty much paying off everything so we can manage one payment a month.

The 'one payment' fallacy. Your problem is not the number of payments you make each month, it is the amount you owe.

The problem with a loan is that the repayment terms are a lot harsher than a credit card. You are on a treadmill month by month of finding that money and no flexibility for any emergency which might crop up.

If you must go for a 'consolidation' loan, remember it is not a solution to your debt problem, it is just a rearrangement of your debt. And above all, list all of your debts the amount owed and the APR and put them in order of decreasing APR. Find out the APR of the 'consolidation' finance and only transfer the debts with a higher APR

eyeopener2

Post your SOA, you will be amazed at how much you can save if you put your mind to it.

Usual suspects are Sky, mobile phones, Internet/phone, grocerys spend, work lunch, coffee before work, going out money. All can be trimmed to attack your debts.

barbiedoll

The trouble with consolidating your debts into one monthly payment is that as soon as your credit cards are clear, it will be all too easy to start spending on them again. I know this because I have done it! :mad:
There is ALWAYS some emergency that you didn't plan for, car repairs, boiler breakdown etc etc and before you know it, you have another few hundred quid debt on a high-interest credit card and you are in even more trouble than before.

The other posters have pointed out the "snowball" method, it works for many people and as you can afford the repayments on your debts, this may be the way forward for you. The sense of satisfaction when you have cleared one of the cards is immense. But......as soon as it is paid off, either cut it up and cancel the account or, if you don't want to live without it, do as one MSEer suggested and put it in a cup of water and stick it in the freezer! (You can't use it easily but it's there if you need it)

If your credit rating is good, have you thought about a 0% balance transfer? Martin publishes the best deals on this site regularly and if you can get one, you can pay as much as you can to clear your debts a bit more cheaply. Bear in mind that there will be fees to pay too.

Good luck in clearing your debts, if you do decide to post your SOA, you will get lots of helpful suggestions to enable you to trim your outgoings.

carrieuk

Statement of Affairs and Personal Balance Sheet
Household Information
Number of adults in household........... 2
Number of children in household.........
Number of cars owned....................
Monthly Income Details
Monthly income after tax................ 1022
Partners monthly income after tax....... 928
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 1950
Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 500
Management charge (leasehold property).. 0
Council tax............................. 98
Electricity............................. 25
Gas..................................... 38
Oil..................................... 0
Water rates............................. 32
Telephone (land line)................... 29.99
Mobile phone............................ 115
TV Licence.............................. 24
Satellite/Cable TV...................... 0
Internet Services....................... 0
Groceries etc. ......................... 240
Clothing................................ 10
Petrol/diesel........................... 120
Road tax................................ 11.33
Car Insurance........................... 25
Car maintenance (including MOT)......... 20
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 30
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 12
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 10
Haircuts................................ 0
Entertainment........................... 120
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 1460.32

Assets
Cash.................................... 2000
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 2000

No Secured nor Hire Purchase Debts
Unsecured Debts
Description....................Debt......Monthly...APR
C Cc...........................450.......12........24.9
B cc...........................1800......45........18.9
Evans..........................400.......10........24.9
Overdraft......................2000......25........0
Total unsecured debts..........4650......92........-

Monthly Budget Summary
Total monthly income.................... 1,950
Expenses (including HP & secured debts). 1,460.32
Available for debt repayments........... 489.68
Monthly UNsecured debt repayments....... 92
Amount left after debt repayments....... 397.68
Personal Balance Sheet Summary
Total assets (things you own)........... 2,000
Total HP & Secured debt................. -0
Total Unsecured debt.................... -4,650
Net Assets.............................. -2,650


other child related expenses are partners child maintenance (private agreement)

Our mobile phone bill is high i know... £25 of that will drop off in June as we stupidly have 3 contracts right now. Our other two are due for renewal in about a year.. it was a stupid mistake and I have reduced the tarriff already with Orange

I dont quite know what our gas and electric will be so I have put the std payments in for them and any arrears we will have to deal with.

We currently have taken advantage of Virgins deal for 29.99 for the first 6 months then 39.99 plus £40 cashback

I havent included bank charges etc.

I'm trying to keep a spending diary to see where the rest of that money goes as we never have had £300 left over! Will try to keep one for the rest of the month and see what it comes out with.

I dont know quite what car maintenance will be this year as i've never paid for my MOT. My parents have always sorted that out and not showed me the bill. I was very lucky in that respect so I have no idea what to put away for those kind of expenses.


I know we can pay these debts off it just takes ages

carrieuk

and all our credit cards and store cards are cut up. I cant be in debt like this for much longer i want to save for my wedding!

[Deleted User]

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2

Monthly Income Details
Monthly income after tax................ 1022 (any way to increase- overtime?)
Partners monthly income after tax....... 928 (as above)
Total monthly income.................... 1950

Monthly Expense Details
Rent.................................... 500
Council tax............................. 98 (Can you ask to spread this over 12 months instead of the normal 10)
Electricity............................. 25
Gas..................................... 38
Water rates............................. 32
Telephone (land line)................... 29.99
Mobile phone............................ 115 (very high - if in contract drop to a lower tariff - if out of contract look at SIM only or PAYG)
TV Licence.............................. 24 (how long have you been paying this - once up-to-date will revert to £12.37 pmonth)
Groceries etc. ......................... 240 (High for 2 people - try dropping brands, batch cooking, meal planning, try cheaper supermarkets Lidl/Aldi)
Clothing................................ 10
Petrol/diesel........................... 120
Road tax................................ 11.33
Car Insurance........................... 25
Car maintenance (including MOT)......... 20
Other child related expenses............ 30
Contents insurance...................... 12
Presents (birthday, christmas etc)...... 10
Entertainment........................... 120 (this is quite high as well, what do you spend it on? Cut back)
Total monthly expenses.................. 1460.32

Assets
Cash.................................... 2000 (It doesn't make sense having cash savings if they are earning a lower interest rate than what you are paying on your debts (it's unlikely that you are earning 24.9% or above in interest so pay towards most expensive debts and start saving again once debts are gone.)
Total Assets............................ 2000

No Secured nor Hire Purchase Debts
Unsecured Debts
Description....................Debt......Monthly...APR
C Cc...........................450.......12........24.9 (pay off with cash savings, and stop using card)
Evans..........................400.......10........24.9 (pay off with cash savings, and stop using card)
B cc...........................1800......45........18.9 (Pay of remainder with cash savings (£1150) leaving a balance of £650 to pay) - as when other debts are paid off this will be the one costing you the most pay all surplus you have in your SOA (including previous minimum payments to CC1 and Evans card (12+12+45+any surplus you have)
Overdraft......................2000......25........0 (once other debts are cleared pay this off with SOA surplu)
Total unsecured debts..........4650......92........-

Monthly Budget Summary
Total monthly income.................... 1,950
Expenses (including HP & secured debts). 1,460.32
Available for debt repayments........... 489.68
Monthly UNsecured debt repayments....... 92
Amount left after debt repayments....... 397.68 (Do you actually have this at the end of every month? If not keep a spending diary to see where it all goes, noting down all the spends that you make both large and small)

Personal Balance Sheet Summary
Total assets (things you own)........... 2,000
Total HP & Secured debt................. -0
Total Unsecured debt.................... -4,650
Net Assets.............................. -2,650




I havent included bank charges etc. (what bank charges do you other than overdraaft charge? Are you paying for a bank account? If so drop from premium account to a regular one)

I'm trying to keep a spending diary to see where the rest of that money goes as we never have had £300 left over! Will try to keep one for the rest of the month and see what it comes out with. Very good idea

Hi,

I have made some comments above - hopefully some of them will be of use to you.

The major thing here that you can do is use the savings to pay off debts starting from the highest costing debt and working down the list - it will save you a lot of money in interest payments in the long run, and once you are debt free you will have much more disposable income to pay into savings so it will soon bild up again.

HTH

D9

DVardysShadow

carrieuk wrote: »

... I havent included bank charges etc.

I'm trying to keep a spending diary to see where the rest of that money goes as we never have had £300 left over! Will try to keep one for the rest of the month and see what it comes out with.

Looking at your SoA, you ought to see off your debt in about a year or so, except you never have the £300 left over. This suggests you ahhave a money leak - you have no idea where some money is going.

The bank charges can be horrendous - even at 0% - it may actually be worth moving the overdraft to the cards by putting spending on the cards rather than from the bank account and let the bank account build up [do NOT go out of your way to spend for this!!!!!]. Certainly worth doing the calculation

eyeopener2

Pay the Evans card and the C cc with your savings and keep £1000 as an emergency fund (very important)

Then see where your £300 is going.

Once you have a good idea where that money is going you can make serious in roads into your other debts.

This is douable with a bit of organistion and will power