Taking out a loan to pay of card debts, (then doing it again)

Archie86

Hi folks, looking for some advice.

At the moment I have 5 credit cards and I am only paying the minimum monthly payment on each of them. The cards are in my name, and the debt totalls about £12,000. This was accumulated paying off debts for my fiancee a couple of years ago that she was being chased for. She has no outstanding cards or anything, and our car is in my name.

I see from reading other threads that you can get get roughly 50% of your salary in credit. I earn £19000 between my full-time job and a part-time job. My fiancee earns about £16000.

I was wondering what the chances of me being able to get a loan for about £5,000 in both our names, use that to pay off £5,000 worth of card debt, then basically do the same again fairly soon after for another loan to pay off another £5,000 worth of it.

Emmzi

I think it is unlikely. A record of minimum payments only suggests you are over stretched and even if it is for consolidation lenders will not be keen.

Tixy

What is your fiancee's credit file like? If she has no debts and a good credit history then she might be able to get a loan in just her name?

Banks would see you as already overstretched so you might well struggle to get any additional credit.

Once debts are paid off and closed down it can take a couple of months for your credit files to be updated to reflect this so if you do try your original plan then make sure you leave long enough between applications.

Have you worked out how much you can afford towards your debts in total? if you are only able to meet minimum payments will you be able to service 1 or even 2 £5k loans?

I would suggest trying to look at ways you can increase your minimum payments, even if just by a small amount.

Do the APRs differ a lot over the cards you have? could you shuffle the debts around between the cards so as to reduce the interest you are paying?

Cardinal-Red

Emmzi wrote: »

I think it is unlikely. A record of minimum payments only suggests you are over stretched and even if it is for consolidation lenders will not be keen.

Is this true? I note newer credit files show whether the payment was minimum or not. Does this mean for those of us still stoozing or taking advantage of 0% deals, your credit worthiness effectively decreases with each monthly payment?

paddyrg

^^ I imagine it would be considered as a pert of the bigger picture - if you are overpaying one card to clear it but minimums on the others, then go on to the next, it'll look different from sitting on some free 0% credit which again looks different from someone just paying minimum payments and making no inroads into their debt position. Lenders look at the whole picture, and each has different criteria for approving lending.

OP - honestly, the chances are slim, but why not give it a go? You are, after all, not going to lose anything by trying (and I assume you have already cut up those cards, not re-spending!!), so are not going to be looking to extend your debt for long (as you close down card accounts).

The thing to watch for is the loan APR is unlikely to be even close to the headline/representitive APR you see advertised - as you're already heavily in debt, you will appear as a risky borrower, and pay accordingly in case you decided to enter debt management, etc. If you want to make things more likely, talk to each credit card company to make sure your 'available credit'/credit limit is lowered (as this is what the 50% indicator is based on, not actual amount borrowed).

But as some clever bod above said, can you just work at overpaying your cards? Start with the highest interest one and overpay all you can each month, then you snowball the savings as the more that one reduces, the faster you can pay it off, then the next one, then the next one, until they are all gone (forever, I trust!).