In debt and in search of best ideas

TheLearner2008

EDIT: I must apologise to everyone, I just noticed that I am paying 0% on my Tesco credit card aswell...I had no idea! I have updated the values below for what I intend to do now:

I have always considered myself well informed when it comes to money management but I became unemployed for 3 months and things have spiralled out of control and am keen for any advice.

I earn £30k a year now and am employed again, here is a breakdown of my debt:

Overseas card - £ 676.80 - 18%
Overseas card - £ 668.77 - 18%
Tesco personal loan (£254 per month 1.5 years left of 3 years) - £ 4,066.00 - 15%
Tesco credit card - £ 1,600.00 - 0%
Lloyds TSB credit card - £ 5,500.00 - 0% (for 12 more months)
TOTAL - £ 12,411.57

I have no idea where to start, what is everyone's advice. Should I consolidate all my debt into a new loan or should I just keep paying every month the highest first or what should I do?

This is what I doing currently:
1. I pay a fixed amount of £150.00 into overseas cards.
2. I pay the minimum to my tesco card
3. I pay the £254 for the tesco loan
4. I pay the minimum £55 to Lloyds credit card.

My thinking is that I will pay each off one by one starting with the highest (tesco credit card).

I just feel like its going to take so long and affect my lifestyle as I earn very little.

Any tips?

Tixy

is it about £500 a month you are paying?

Have you put the figures into the snowball calculator http://www.whatsthecost.com/snowball.aspx. It looks like it will take about 28months to clear the debt at £500 per month.

I would do as you are now, just keep paying off as much as you can afford to the most expensive debt - don't forget to increase the tesco monthly payment as the minimum payments on the others gradually decreases.

Do you have any other open credit card accounts (with no balance?), if so you could see if they would offer you any promotional balance transfers (either 0% or low life of balance).

Have you considered trying to get a new 0% card from another provider? If you managed to keep up with repayments during your unemployment and so have a clean credit history then it could be worth an application. Although your level of debt compared to your salary may mean you wouldn't be accepted.

I guess you been through all your expenditure to see you are on the best/cheapest deals for everything (insurances, utilities, phone & broadband etc)?

TheLearner2008

Hi Tixy,

Thanks very much for your response. Please note I have updated my question in light of new found information.

I guess the new information means I don't need to apply for another card like you suggested, but yes I have been rejected for loans and cards recently and my credit report is average on equifax and credit expert so I guess I will just continue paying into my overseas cards.

Just thought there might be another solution but its basically just putting my head down and waiting it out now I guess

TheLearner2008

Tixy,

I am also currently saving £50 a month and have about £400 saved. Should I use it to pay off and stop saving each month?

mizmir

TheLearner2008 wrote: »

Tixy,

I am also currently saving £50 a month and have about £400 saved. Should I use it to pay off and stop saving each month?

Personally I would keep some or all of the £400 as an emergency fund. How much depends on your circumstances - if you have family, a house etc - but is worth having something in hand in case the car breaks down, the dog gets sick, the roof starts leaking... if none of these apply and you are only responsible for yourself, then you may not need anything.

I would then take the rest of the savings and the £50 a month and pay it off your debts. It is costing you money while you have the interest on the cards.

Good luck.

turbo.jet

mizmir wrote: »

if none of these apply and you are only responsible for yourself, then you may not need anything.

I totally agree. I didn't do any saving while I was in debt because I was responsible only for myself and my focus was getting rid of the debt as soon as possible. Now that I am debt free all the money I was paying off debts is saved instead.

I'd be wary of recommending more credit (ie a new loan) without first finding out if you have truly changed your ways, and your overall debt is going down. Even if it is, its a good idea to just shuffle and reduce within your current lending.

Are you looking at ways to reduce your outgoing so you can have more to throw at your debts? If so, you need to do an SOA, there is a thread with the link at the top of the forum.

Otherwise, do the snowball thing Tixy has suggested.

TheLearner2008

turbo.jet wrote: »

do the snowball thing Tixy has suggested.

I am a bit confused with the snowball thing. Even though I have 0% for 14 months it still makes me pay off the 0% card first?

TheLearner2008

Obviously the snowball calculator is not taking into account that I will be moving the debt after the 14 months to another 0% card

Tixy

Assuming you have chose interest order (not balance order) then its probably that due to the high rate the 0% card will jump to after the 0% period, and the estimated repayment time, that it still works out cheaper to pay off the 0% first.

There is another snowball calculator you could double check the results on - http://www.makesenseofcards.com/snowcalc.html

Tixy

TheLearner2008 wrote: »

Obviously the snowball calculator is not taking into account that I will be moving the debt after the 14 months to another 0% card

That will be the reason. I guess its best not to count on being able to get a 0% card in 14months (especially in the current climate with several big players exiting the UK credit card market). And then if you can it will be a bonus.

TheLearner2008

Tixy wrote: »

That will be the reason.

I just adjusted the interest free period to 36 months and it still says I must pay off the 0% card first.

It has the highest interest rate but surely if its 0% that is not correct