£20,000 debt

blisteringblue

You don't elaborate on your budgets? When you missed a couple of payments was it because you "forgot" or you couldn't afford them?

If you do have the income to cover the payments I would recommend a snowball to clear the cards and forget the loan, consolidation is never a good idea however appealing it sounds.

Snowballing is paying a little extra off the highest interest card and once that is clear moving that extra payment to the next highest. This way you normally clear the debts in a smaller time frame than the loan without any additional borrowing. Have a look here, this is the one I use and I am working on clearing over 40k in 3 years this way.

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

Key to this whole process is your budget though, no point going through it if you cannot reign it in. We've been quite generous with ours and it normally leaves around £130 extra to put towards our highest card debt (Next @ 26%). We could cut our spending to the bone as some have done on here, but I think you need to find the right balance of still enjoying some luxuries but also clearing the debts.

I'd get over to the Debt Free board for more tips than the credit card board though.

fd1972uk

Is the standard variable rate not lower than your actual rate anyway in the current climate?

Won't your payment go down anyway?


FD

redpete

Stitchlover1 wrote: »

Thats not very helpful really OllyM that was the first comment I read and made me feel really downhearted.

It might not have been encouraging but I would argue the comments are helpful - they are advising what the realities of your situation are likely to be, that it is unlikely you will be able to get a new unsecured loan of £20k at a reasonable rate of interest and that you are unlikely to get a mortgage offer with a new mortgage company at 120% LTV and a reasonable rate of interest.

Once you realise this then you can start to plan your way out of debt by other means.

SAHD_Jim

If you have a 120% mortgage and £20K debt and miss cc payments, then it is clear that you are not living to your means.

You need to establish your monthly income and then ensure that your outgoings are much less than this. When commenting on cutting your spending, you said "maybe I'm not sticking to it". There is no "maybe", either you are or you are not. I would suggest from your comments you are not.

You need discipline and initially cut out anything that is not essential until you are on more of an even keel. Write everything down - it will give you much more clarity of purpose.

And as someone else suggested, cut up the cards. Don't build up any more debt.

jamesd

Stitchlover1 wrote: »

I have already had a call from Northern Rock who have advised I can stay with them but would be on a variable rate.

Good, that's probably the best deal that you'll get and that removes some uncertainty. Check with them to see what the variable rate currently is so you'll know whether you'll start out having more or less to pay. You'll also need so allow for increases in interest rates next year that will increase your mortgage cost later, even if it drops for a while.

Do you have a local credit union? Sometimes the loans from them can be cheaper than cards.

Managing the card balances may help you to shift more to 0%. You're more likely to get existing customer balance transfer offers when you've cleared the balance on a card and not used it at all for six months or more. A typically Virgin or MBNA offer might start at 5% fee for six months at 0% ongoing interest rate (effectively 10%) then increase to 9 months after another few months (effectively 6.7%).

You could also consider paying more on the card with the highest minimum repayment percentage, to reduce the minimum repayments you have. That will give you more flexibility to shift extra payments to the card with highest interest rate. Only worth doing this if the highest minimum card is reasonably close in cost to the most expensive, else it'll cost you more in interest.

Setting up a standing order to pay an extra Pound off all of the cards would stop them reporting to credit reference agencies that you're making only minimum payments and that may increase your chance of getting a 0% for purchases or balance transfer card to help to reduce the costs.

Getting a loan for all of the money probably isn't a good idea because its' too inflexible, it'll make it hard to use card 0% offers later to save the loan interest by clearing it with a card. getting a loan to clear just a card that is good for existing customer offers might be a good idea - say Virgin or MBNA. Then you can later use the offers to clear another card and gets some money at 0% (or 6.7-10% really) for a while.

Once the new mortgage is in place explain your situation to NR and ask whether you can switch to interest only for a while, if not already interest only, to help you to get down the card debts and make everything more affordable long term. If you have the option of mortgage repayment holidays it's worth considering using them as well. That will shift the interest on the mortgage to mortgage capital so it costs you mortgage interest but that'll be cheaper than cards. Later, once the cards are taken care of, you can overpay to get rid of this extra mortgage debt.

Doing all of these things and also paying close attention to spending would be good. The key is to make a big dent in things as early as you can because that then snowballs later and makes it easier.

If you post the cards and their minimum repayment percentages, balances and interest rates (long term and any temporary 0% deals and when those end) I or someone else might have some suggestions to optimise them. Also knowing in which name each card is and incomes for each may suggest opportunities for one or the other of you to get a deal that can help the combined picture.

I'll probably suggest as part of that calling the cards offering the lowest rates and seeing if they are interested in doing a balance transfer to shift some debt from the more costly cards to the lower cost ones. Some will bite if invited in this way, others won't.

If you didn't know it, you can balance transfer from one person's card to that of another person, so you can sometimes save money by moving debt between you.

Lots of things to do to get fairly small improvements with each step that should add up to making a bigger difference.

Stitchlover1

Thank you JamesD that is really helpful. Im going to do an SOA on DFW boards, and go from there, but i like the sound of the extra £1 off each card - does that actually work ? x

Stitchlover1

Just posted my SOA on DFW board, it makes for pretty sad reading. I need an extra 300 per month it looks like :-( x