Question Over -Getting Rid of Credit Card Balances!

GUMBO

I have 3 Credit cards with outstanding balances and 3k's worth of overdraft that I want to start getting rid of - hopefully in the next 5 years.

The credit cards are

Barclaycard - about 7k

MBNA - about 6k

HSBC - about 600

O/D's

Hsbc - 1900

Hsbc - 900

The O/D's I am chipping away at very slowly but the credit cards are a concern - MBNA is about £90 interest per month and Barclay card (although some is interest free at the moment will be similar Im sure in the not too distant future).

After reading several thereads I can see that no-one thinks a consolidation loan would be a good option but Im not sure what else to do?

My wage covers the rent, C/Tax, Electric, Car Insurances, Tv, Phone Broadband, Water etc.. But thats it.

Fortunately My significant other has now manged to get work and in the new year we will have her wage to live off.

Could anyone give me any options to trash the debt I have.
There is also a BOS loan that has untill Sept 2013 to run with about 10K left on it that is covered by my wage.

The Credit cards are about £300 pcm for min payment at the mo but would a loan (even with the interest) be cheaper in the long run, rather than keeping going on the min payments.

my flexible outgoings have been cut a long way down and Iam maitaing a positive outlook but any advice would be welcome.

Thanks.
G (first post)

Tixy

Hi Gumbo and welcome

Firstly do you know the APRs on all your debts? Find that out first so that you know which is costing you the most and which to target first.

Great that your partner will be working as well, hopefully that will make a big difference to the amount you can afford to pay off your debts.

The first thing we recommend is completing a statement of affairs which will show you and us how much you should have for debt repayments, or how far short you are of being able to meet them each month, as well as detailing your debts and APRs etc. People then should be able to advise on your options and also see if they can spot any other possible savings etc in your outgoings - this is the format we use http://www.makesenseofcards.com/soacalc.html

GUMBO

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 1490
Partners monthly income after tax....... 850
Benefits................................ 146
Other income............................ 0
Total monthly income.................... 2486

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 380
Management charge (leasehold property).. 0
Council tax............................. 115
Electricity............................. 141
Gas..................................... 0
Oil..................................... 0
Water rates............................. 39
Telephone (land line)................... 22
Mobile phone............................ 20
TV Licence.............................. 12
Satellite/Cable TV...................... 21.5
Internet Services....................... 0
Groceries etc. ......................... 400
Clothing................................ 20
Petrol/diesel........................... 110
Road tax................................ 15
Car Insurance........................... 40
Car maintenance (including MOT)......... 4.6
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 13
Other child related expenses............ 20
Medical (prescriptions, dentist etc).... 4
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 11.15
Life assurance ......................... 0
Other insurance......................... 9.9
Presents (birthday, christmas etc)...... 50
Haircuts................................ 0.6
Entertainment........................... 100
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 1548.75


Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 1500
Other assets............................ 0
Total Assets............................ 1500

No Secured nor Hire Purchase Debts

Unsecured Debts
Description....................Debt......Monthly...APR
BOS Loan.......................11950.....318.......12.8
MBNA CC........................7000......149.......17.52
HSBC CC........................425.......9.5.......15.9
HSBC overdraft 2...............900.......50........19.9
HSBC overdraft 1...............1800......50........19.9
Barclaycard....................6000......144.......17.5
Total unsecured debts..........28075.....720.5.....-


Monthly Budget Summary
Total monthly income.................... 2,486
Expenses (including HP & secured debts). 1,548.75
Available for debt repayments........... 937.25
Monthly UNsecured debt repayments....... 720.5
Amount left after debt repayments....... 216.75

Personal Balance Sheet Summary
Total assets (things you own)........... 1,500
Total HP & Secured debt................. -0
Total Unsecured debt.................... -28,075
Net Assets.............................. -26,575


This is pretty rough.
We prob spend more on Groceries.
I do all the car servicing so its only parts that I pay for.
wasnt sure how to enter the overdraft stuff.

thanks for replying.

G

Tixy

Hi, thanks for posting that up.

The good news is that you seem to have an extra £200 odd to put towards your debts each month, which would mean you could really start to make a dent in the debts, starting with the most expensive
one.

Whilst your APRs are not low, they are also not extortinately high which is also good.

I see you've said its rough figures and I guess at the moment you don't find you have the £200 spare a month to pay extra? If thats the case we usually suggest keeping a spending diary to work out where the missing money is being spent.

I've put a few comments on your SoA - where you might want to investigate to see if you can save any money.

GUMBO wrote: »

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 1490
Partners monthly income after tax....... 850
Benefits................................ 146 have you recently checked you are getting all you are entitled to here?
Other income............................ 0
Total monthly income.................... 2486

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 380
Management charge (leasehold property).. 0
Council tax............................. 115
Electricity............................. 141 is your heating and everything elec? do you have any arrears you are paying off? have you tried shopping around to see if you can find a cheaper supplier or a better tariff?
Gas..................................... 0
Oil..................................... 0
Water rates............................. 39
Telephone (land line)................... 22
Mobile phone............................ 20
TV Licence.............................. 12
Satellite/Cable TV...................... 21.5
Internet Services....................... 0
Groceries etc. ......................... 400 you should be able to work on reducing this down a bit. Should be able to manage on £300a month for a family of 4. Perhaps try the drop a brand challenge? or try meal planning before you do a weekly shop? There are loads of tips of reducing this cost on the oldstyle section of the forum, will post a couple of links at the bottom. Some can manage a family of 5 and pets on around £250, thats a bit extreme for most but shows it can be done!
Clothing................................ 20
Petrol/diesel........................... 110
Road tax................................ 15
Car Insurance........................... 40
Car maintenance (including MOT)......... 4.6
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 13
Other child related expenses............ 20
Medical (prescriptions, dentist etc).... 4
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 11.15
Life assurance ......................... 0
Other insurance......................... 9.9
Presents (birthday, christmas etc)...... 50
Haircuts................................ 0.6 (very impressively cheap!)
Entertainment........................... 100 what sort of things is this spent on? could you try reducing in the short term?
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 1548.75


Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 1500
Other assets............................ 0
Total Assets............................ 1500

No Secured nor Hire Purchase Debts

Unsecured Debts
Description....................Debt......Monthly...APR
BOS Loan.......................11950.....318.......12.8
MBNA CC........................7000......149.......17.52
HSBC CC........................425.......9.5.......15.9
HSBC overdraft 2...............900.......50........19.9
HSBC overdraft 1...............1800......50........19.9
Barclaycard....................6000......144.......17.5
Total unsecured debts..........28075.....720.5.....-


Monthly Budget Summary
Total monthly income.................... 2,486
Expenses (including HP & secured debts). 1,548.75
Available for debt repayments........... 937.25
Monthly UNsecured debt repayments....... 720.5
Amount left after debt repayments....... 216.75

Personal Balance Sheet Summary
Total assets (things you own)........... 1,500
Total HP & Secured debt................. -0
Total Unsecured debt.................... -28,075
Net Assets.............................. -26,575

If you really had the £200 spare a month, and could reduce groceries by £100 and so paid an extra £300 to your debts on top of that £720 you could be debt free in 34 months paying £6057 in interest overall. 34 months would be pretty great to clear £28k of debt. And probably shorter than any consolidation loan.
(as a contrast if you only pay £720 then it would take 55months and cost £10852 in interest)

You can compare how long it would take, and the best order to tackle your debt using the snowball calculator (same site as the one you used above) to see how much difference a small overpayment can make.
Also as you reduce your debts you could probably try applying for 0% credit cards which would reduce the debt even further.

Personally I would steer clear of consolidation loans, I also think you might struggle to be accepted given you existing high level of debt compared to income.

Hope some of these comments might help.

GUMBO

Thanks again.
Think I should get a little tax credit thats not listed but not much (about 14per week).
Will redo the SOA correctly with my better half and post when done.
The house is all electric and on top of that charge is £22 every other month for top up heat from a Gas heater.
Have just switched to a better tarrif that may drop me a tenner a month on the electric.
I am cooking onepot meals that I can freeze the excess for later in the week but I rekon the grocery bill could definatley come down.
Cheap haircuts as I do my own.
My wife does the kids and generally her own trimming, with a paid cut every now and again.
Got a load of Space blanket to for more insulation in the house ( storage heaters are Cr*p).
Changed all the bulbs for energy savers.

Will see how I get on with reducing the cc's and review again when the lowerbarclaycard interest on part of the balance come close to an end.

I kinda like the ease of a loan in the one payment anf forget about the direct debit till its done.

TESCO and other are offering 6.4 for up to 15k - which was my initial thoughts and the fact that the rates wont stay there for long.

Chat with better half and see.

Positively driving forwards.

I know that debt freedom isnt too far away.

This site is really helping me to stop freaking out!!

Everybodys probs are relative to themselves and sometimes it just takes a little bit of advice to pull up!

Thanks again.
keep you posted.

Tixy

Sounds like you got a handle on reducing outgoings. I remember having storage heaters briefly - and they were awful.

To be honest I think you'll struggle to get a consolidation loan given you level of debt compared to your income (although it could depend what debt is in your name and what is in your partners). But people generally struggle to get any new credit, including consolidation loans that will take them over 50% debt to income ratio. Even if you were accepted it might well be at a much higher rate than the representative APR (which only 51% of successful applicants get).

Good luck with the debt busting.

GUMBO

I think you may well be right there - I'll give it a whirl as the interest would then be slashed to around 3k over 60 months if It works and repayments approx 300pcm if not at least Ive stated to ger a handle on it!!

Thanks Loads.

Tixy

Do you really only want £300 repayments? what will you do with the remaining £500 or so you will have spare? If you put that into a savings account then you will earn far less on that than what you would be paying on the loan.

GUMBO

I never really thought about that.
I was kinda just thinking along the lines of trying to keep my wages to cover all the set expenses and debt so that we would have my wifes wages to live off.
I do know one thing - I wont be having credit cards with ant outstanding balances again. ;-)

GUMBO

Okay, so Ive been offered a £14999.00 loan for 8.4% which would take care of the credit cards - interest payable over 60 months is £3241.
Payments £304pcm

I have 34 payments (2years 8months) to run on the other loan payments £318pcm.

This would leave me without credit cards to worry about and only the overdrafts left to sort.

Any thoughts? is this a better deal than just reducing the cards?- Im a bit fried with the maths at the moment and the interest calculations always leave me bewildered.

Tixy

Only consider it if you are going to close your cards / cancel overdrafts and be certain that you will not run up any more debt.

Everyone thinks that they won't but many many people find themselves just putting one emergency purchase on a card, which they will definitely pay back next month, but then next month its xmas and they have presents to buy and its much easier to put on a card and then pay it off the following month, and the following month you realise you don't have enough money to pay off everything and you gradually slip back into using the cards regularly and building up more debt on top of your consolidation loan. Of course I know you think you won't do this, but if you take the consolidation loan then you need to be absolutely certain that you won't.

If you take it then I would pay off the overdrafts first (as they are costing you most in interest), then pay off all the cards, leaving just £1125 on the barclaycard, as that is the cheapest card, and then aim to clear that quickly. If your 2 loan repayments are £622, then you should be able to afford to pay £300 off the barclaycard each month until its is clear.

Good luck whatever you decide.