Descision Time advice

Radman

Hi everyone, this is the first time I have posted here andthe first positive step in trying to deal with some debts which have been built up mainly via three credit cards(£15,000 approx). I also have a loanwhich was taken over 7 years which has roughly 2 and a half years left to run(approx. £5,000 left to pay).



In the past I have done a bit of credit card shuffling forthe interest free deals but despite a good credit rating because of highoutgoings in relationship to earnings have been rejected from such deals so nowstuck with typical 16% ish rates.



I’ve tried my bank for a loan with a view to scrapping allthe cards with a view to paying off with a loan but was refused due to the samereason as the % free credit cards. Thebank seemed to want to push me towards releasing some equity in my property asa re mortgage (at present the house is fully paid for with no mortgage) whichwould be at a lower interest rate to that that I am paying on the credit cardswhich sort of made sense but not sure if this was a sales push to try to sell aremortgage sale ? rather than a way to help me.



I’m thinking about possibly taking the re mortgage offer but also considering as an alternative organisations such as Step Change so that willhelp clear things - being a bit oldfashioned at 50yrs old I’m not sure in my mind I am happy with the mortgageidea though, but would follow this idea if it was the best way forward. As you can see a bit indecisive !! so wouldlike any advice on pros / cons of each option.



Thank you to anyone who could give a few pointers, I know atthe end of the day it is my decision and feel now I have submitted this e.mailI’ve started my journey to clear these debts (as strange as that may sound).

Cheers, Radman

Tixy

The general advice is that a secured loans should be a last resort option. By converting your unsecured debt to secured you stand a greater risk of losing your home if you have a change in circumstances.

have you worked out a detailed monthly income / expenditure to see how much you should be able to put towards the debts each month?
And is that less than your current minimum repayments? have you looked to see whether there are any other outgoings you can reduce to increase what you can pay a month.

Are all the cards maxed? is there much difference in the interest rates across the different cards?

It could be worth completing a statement of affairs and posting on here for people to be able to advise better or completing the debt remedy on step change for ideas.

sourcrates

Mmm difficult one, looks like either way you will be paying out for a long time, in the end a re- mortgage will cost you more than a debt management plan, you don't say if you have any savings that you could pay towards the debt ? is that an option ? failing that I think its down to what your most comfortable with, if your having trouble with the repayments, you could try the unenforceability route (loan 7 yrs old prior to 2007) don't know how long you've had the cards, pre 2007 the accounts are likely to be unenforceable, I wouldn't advise this route if you want to keep a clean credit file, and im not saying you should not pay your debts, but if you are really struggling it could be an option for you, good luck in whatever you decide.

Radman

Thank you both for your kind time and reply, apologies for delay in coming back.

At present I am covering the min payments + around 10 - 20 pounds extra on each of my three credit cards. After paying other utilities and day to day stuff it leaves me around £100.00 spare. However more ofter than not this is used for shopping top up and petrol.

I have no savings available that I can use credit card rates are roughly the same and are as follows :

Yorks bnk = owe £6127.64, have £1572.36 available
Barclaycard = owe £4938.51, £6261.49 available
Virgin = owe £49389.01, nothing available as card clsed to avoid higher interest payback rate.

At present I can cover payments - just - but it does not leave much spare for emergencies and this is where I've fallen into the trap of using the credit cards.

I'm swaying more at present towards the Step Change option rather than the re mortgage option. Presently in good health and have a stable secure job but of course you never know what is around the corner so the advice given re the non secured option has helped me feel a little more comfortable with the debt plan option.

I've cut down on petrol by walking to work rather than car but after looking through my accounts can't see anywhere else that I can cut back on expenditure.

Thank you all once again for you time and any anticipated advice.

Best Regards,
Radman.

... starting to get on the correct track ( could be a slow train though !)

Jack8171

Hi Radman,
Well done on setting out to sort this. £20k is a lot lot lower than most people start trying to get a handle on their debts, so it should be very possible. My debts were £23k when I started, so same kind of ballpark. Currently they are £8k.

There are lots of positives to start with - the ones that strike me are:
- the debts are manageable
- you can pay the minimum payments
- you seem to have a budget.

The things that need some attention:
- you have no emergency fund
- your budget isn't accurate enough.

I'm not going to give you advice, but I'm going to tell you what I would do in your place, and you can think about whether or not you would do the same.

The first harsh truth is that paying off debt takes time. Years. My first plan took me 7 years to pay off my debts. I've got that down by a year, and I'm over 3 years through, so the end is starting to be in sight, but there wasn't a quick fix solution for me, and there may not be for you.

If I were you - which I'm not - this is what I would do.
First I would give up spending on credit cards. Never spend on them again.
Second, I would accept that the credit cards would not be paid off for a long time.
From the £100 you say you have spare, I would start saving an amount, probably £50-£70, in an instant access savings account. This would be my emergency funding, rather than my credit card.
The remainder of the £100 I would use to pay off whichever credit card had the highest interest rate. This would go in the budget and I would be very disciplined. If the budget said £34.52 extra on the credit cards, this is the extra I would pay, month on month on month.
Then I would revisit my budget every month to see where it didn't match up to reality. You say you dip into your extra money for petrol - ideally this should be budgeted. I might have an extra savings account for budgeted petrol I hadn't spent this month so I had it for next month.
In 2.5 years when the personal loan was paid off, at this point all the money that I spent on the loan I would move across to paying down the credit cards. This is when the credit card balances would start moving.
In the meantime, every time my phone contract came up for renewal, or my gym membership, or my tv/broadband/phone package, I would look to see if I could get a cheaper deal and that extra money, even if only £2-£3, I would use to pay down the credit card. This does make a difference because it gets me in the mindset to reduce my credit cards, and £2 here and £3 there can end up being an extra couple of hundred a year.
Any time I got a payrise, I would assign a portion of that to paying down the credit cards.
By sticking to this, and showing that my debts were in order and being serviced, my credit rating should improve. At that point I might be able to get a loan or a credit card with a serious longterm 0% (I got 20 months). At this point I would not reduce the amount I paid against my credit card at all, so that the balance would drop faster.
I have a spreadsheet with graphs tracking all mine. It sounds sad, but I find the two lines - the dotted line where my debts would be, and the hard line underneath showing where they are in reality, quite motivating.
Would your family move to a budget Christmas? When I suggested this my sister said 'Oh, could we?' and I realised how many years she'd wished we could.

One final word of advice. Try looking for the yearly budget planner. A monthly budget often ignores Christmas, holidays, car insurance, MOT costs, and the most important foundation of any debt plan is an accurate budget.

Sadly it will take a long time to fix, but it is all very manageable, and one day it should all be gone.

Good luck!

FatVonD

Radman wrote: »

Thank you both for your kind time and reply, apologies for delay in coming back.

At present I am covering the min payments + around 10 - 20 pounds extra on each of my three credit cards. After paying other utilities and day to day stuff it leaves me around £100.00 spare. However more ofter than not this is used for shopping top up and petrol.

I have no savings available that I can use credit card rates are roughly the same and are as follows :

Yorks bnk = owe £6127.64, have £1572.36 available
Barclaycard = owe £4938.51, £6261.49 available
Virgin = owe £49389.01, nothing available as card clsed to avoid higher interest payback rate.

At present I can cover payments - just - but it does not leave much spare for emergencies and this is where I've fallen into the trap of using the credit cards.

I'm swaying more at present towards the Step Change option rather than the re mortgage option. Presently in good health and have a stable secure job but of course you never know what is around the corner so the advice given re the non secured option has helped me feel a little more comfortable with the debt plan option.

I've cut down on petrol by walking to work rather than car but after looking through my accounts can't see anywhere else that I can cut back on expenditure.

Thank you all once again for you time and any anticipated advice.

Best Regards,
Radman.

... starting to get on the correct track ( could be a slow train though !)

Every time I've paid off a balance on my Virgin CC they've offered me a 0% balance transfer facility so I'd be looking to pay minimum payments plus £1 on the other 2 and pay that one down in the hope that I could then transfer one of the others to it. Once you've transferred one of those to Virgin you may then find you get offered a 0% balance transfer deal on that one too which you can use to transfer the third.

Radman

Many thanks to everyone who has offered advice and guidance on my original post. It is very much appreciated and been really helpful.

I appreciate your time very much.

My best to everyone else in a similar position to me, when I'm starting to get sorted I hope that I will at some point be able to give some support and advice to others.


Cheers.... here goes then... lets blitz those debts, I just to have settle with the fact that I need to be really strict with budgeting deff out the c.cards , bit of a long haul but everyones help has given me a pus:T to get this sorted.

Thanks again,
Radman.