£3,300 DEBT - help required

marshmallowkisses

Great idea - my worst problem with selling books (I have quite bulky books I used at uni) - is the price you have to pay to post them, on Amazon, I often made a loss?

Has anyone got any suggestions re better sites to use? They never shift on eBay!

Anthorn

teaandcupcakesplease wrote: »

Hi

Im in a similar situation. I have about £1500 on a credit card and about £500 in overdraft the only difference is i have £1000 savings. I know you shouldnt have savings when you have debt but im worried i wont get it back. However i think im just going to have to bite the bullet. x

Personally I don't go with the no savings if in debt scenario. Yes I can do the math but still don't go with it: If you use all your money to pay off debts and don't save what do you do if you need money in a hurry? Well, if you don't have savings you use your available credit and your debt increases which is laughable. If you are managing your debt payments and still have a residual income then by all means put it into savings as I do.

Getting back to the OP, if your bank has offered a consolidation loan that means you can probably get one from elsewhere which in turn means you can shop around for the best deal if that's the route you want to take.

DCFC79

Do a car boot for the books ? but with other stuff too.

marshmallowkisses

Thanks

I am glad I am not the only one with the savings + debts!

I am actually thinking that rather than entering into a loan agreement (which means I will be charged some sort of interest) - I am going to try my VERY VERY hardest to make any payments I can into the CC/OD accounts. I'd rather do that than get into more debt

marshmallowkisses

DCFC79 wrote: »

Do a car boot for the books ? but with other stuff too.

Might just do that! Thanks, never thought of that! I'm tempted to go back into the uni around freshers week and stick up some posters advertising them!

DCFC79

marshmallowkisses wrote: »

Might just do that! Thanks, never thought of that! I'm tempted to go back into the uni around freshers week and stick up some posters advertising them!

Thats a good idea

PollyOnAMission

You're in a very similar position to me back in January, when I had my lightbulb moment.

I was living in my overdraft (almost back up to £0 on payday), had a couple of credit card balances that I wasn't paying off in full every month and a "rainy day fund" of a few hundred quid sitting in an appallingly low interest online savings account. When I started out, my debts totalled £4,095 so I was a little further down the line than you are. Wish it had dawned on me a bit sooner!

Here's what I did:

1. Transfered the money from my rubbish online savings account to my current account (with overdraft).

2. Took out a 0% on purchases credit card and did all my spending on this rather than my current account (the one with the overdraft). I started a spending diary and budgeted properly to stop frittering money away; bills still came out of this account so it took a while, but after 3 months my current account was back in the black before payday.

3. Took out a 0% on balance transfers credit card and transfered the balances of my old credit cards. I then closed the accounts on these old credit cards, with the exception of one which is a cashback card.

4. Worked out the monthly payments required to pay off the balances on the 0% purchases and 0% BT cards before their 0% periods end (I think they were 18 month deals which is great). Set up direct debits for these monthly amounts from my current account to these cards, so they would be cleared a month or two before the deals end. If I was really brave I'd be paying back just over the minimum and saving the difference then paying it off at the end, but I don't want to take that risk just yet until I can be sure I have a handle on things! STOPPED USING THESE TWO 0% CARDS!

5. Took out an instant access online ISA with a decent interest rate. Now, just before payday every month, I transfer any extra money to this ISA. This means I'm living pay-cheque-to-pay-cheque, but only because I'm saving the extra. However it does mean I make sure I stay living within my means.

This is where I am now: sticking to my budget and spending diary, saving all my extra money. I'm actually doing all my day-to-day spending on my cashback credit card and paying it off in full each month. I also sold a load of stuff on Ebay, sent off old phones to Cex, switched energy/insurance providers etc, made my own lunches to take to work and made sure I did more cost effective batch cooking.

So now my monthly outgoings are a lot more simple:

1. Wage comes in
2. Bills come out
3. Payments to 0% cards come out
4. Every day spending occurs (cashback card) and is paid back in full
5. Spare money gets transfered to ISA

then the cycle continues

Once the 0% cards have been paid off I'll have around £300 extra per month to put in my ISA. After 6 months my total debt has gone from £4,095 to £2,677ish: around £1,400 reduction. It makes me wonder where my money used to go! I'm not paying interest on any of it and have around £450 in my ISA, which I've only been saving to for 3 months.

Hopefully my similar story can give you some motivation!

PollyOnAMission

Just to add:

With regard to having no savings for a few months because I used them towards my debt - yes, it's a hard thing to get your head around even when you do the maths and know it makes sense! However I decided to do it anyway, because I always had those 0% cards to fall back on if there was some kind of emergency. I only had about 3 months with no savings at all, as this is the amount of time it took for me to pay off my overdraft and get everything else switched to 0%. Now 3 months later, I have about the same in my ISA that I used to have in my savings account, but I'm not paying any interest

Rather than view my debt amounts as just the amounts on the cards, I add up my debt amount as a total of all my money (savings, current account, cash etc) minus my credit card balances. Each month I take this total just before payday (i.e. when things are at their worst) and use this as my marker. That way my savings are actually being counted to reduce my debt, which is realistic.

This means that right at the start, I had X amount of card/overdraft debts and Y amount of savings. My total debt was X-Y. After I'd used the savings to pay off the overdraft, the total debt was still X-Y! It all depends how you look at it. Viewing it this way made me really see how I'd be better off to use the savings towards the debt.

marshmallowkisses

Thank you so much for that fantastic insight

I have decided that for now, as I have the 2 CC's ongoing, I am going to do my best to have plenty NSD's and money making schemes, including extra work, in order to pay some money back to the debts as much as possible before considering taking out any more 0% cards (from past experience as soon as I take them out a bit of spending is done).

I actually locked my savings away in a 2-year ISA, which yes, I could have used to pay off some of the debts, but at the time, it always seems like a good idea to "save." However, I am hoping that by the time this period is up, I will be able to put a good bit towards this every month in another high interest account!

Thanks again

PollyOnAMission

teaandcupcakesplease wrote: »

Hi

Im in a similar situation. I have about £1500 on a credit card and about £500 in overdraft the only difference is i have £1000 savings. I know you shouldnt have savings when you have debt but im worried i wont get it back. However i think im just going to have to bite the bullet. x

The way I would see this is that overall you only have £1000 of debt, but yet you're paying interest (assuming it's not 0%) on £2000 worth of debt. I was doing the same thing, albeit with different numbers, and did decide to bite the bullet and use the savings towards the debt. However, I'd only do that if I knew I had a source of credit (for absolute emergencies) available at a LOWER or EQUAL interest rate to the debt. This could come from the credit card/overdraft you currently have a balance on, as you'd have reduced the balance anyway.

Say your £2000 of debt is at 15% interest. After a year this interest will cost you £300 and you'd have maybe £30 interest from your £1000 savings. Total cost: £270.

If you paid your savings towards the debt, you would have £1000 at 15% meaning £150 interest over a year but no income from savings. Total cost: £150.

Say you had a emergency right near the start of your plan and needed £500 for car repairs.

In the first scenario, you'd still have £300 in interest charges but would only have £15 or so interest gained from your savings, as you'd have to take £500 out of them. Total cost: £285. Credit card balance: £2300, Savings balance: £515, Total Debt: £1,785

In the second scenario, worst case would be that you couldn't get a 0% card or one with a better rate than the one you already have. You've got no savings so you spend the £500 on your card, bringing the balance up to £1500. Interest charges would be £225. Credit card balance (total debt): £1,725

It's a simplified example but looking at it that way really helped me get my head around it. Obviously if you can get a 0% card and have that as an option for emergencies, you'd be even better off as you wouldn't have to increase the balance on the 15% debt.