Order of repayment HELP - don't know what to do!

sillyme

Advice needed on debt repayment. Please, no judgement. I know it’s not a pretty picture.

I have three credit cards – all maxed out and on dreadfully high interest - and have just received a very much needed windfall of £6000.I don't know what to do with it for the best.

Current balances:
Blue card – £9100 @ 20.9%
Red card – £11600@ 26%
Green card – £6600 @ 24%

I only have a FAIR credit rating and need to improve this. I want to get off these horribly high interest rate cards, but at the moment I won’t get approved for any 0% balance transfer cards.

So what to do for the best right now with this £6000?

My goals are:
1. Pay off some debt with this windfall (obviously)
2. Repair my credit rating
3. When repaired, transfer existing balances to a 0% card
4. Pay all the debt off

I don’t know what to do and where to spread the money. To pay off some from all, to pay off one entirely and balance transfer from another? What should I do? Help PLEASE!

Cycrow

what would will need to do is pay off the minimum payments on the cards each month.

Do you have enough money to do that normally ?

Then with any remaining money, you want to pay it all off on the most expensive debt, ie the one with the highest apr.
So you should put all the money onto the Red Card @ 26%

just make sure you can manage to keep paying the minimums off on the other cards.

You could perhaps post a SOA to see if theres a way to get more available money each month which will help you start clearing the balance quicker

[Deleted User]

Put it all to the highest rate card.

sillyme

I've got the min repayments covered, yes. I just need to work out what to do with the windfall money to get the best result?

sillyme

Is it better to pay off the highest rate card or to clear one card entirely? And then try to balance transfer from the highest rate on to that?

pichon

I don't think your credit rating will improve massively in a short period of time for you to be accepted for a 0% balance transfer card. I'm not sure how much your credit rating will boost after paying off the Green Card and close it down. That said, I think it would be best to pay off the card with the highest interest rate rather than wait for the new 0% balance transfer card to arrive.

sillyme

No, it'll take a month or two post reducing the overall debt to affect my rating. But I still want to be sure I do the most sensible fasted-impact thing with the money....

grumbler

sillyme wrote: »

3. When repaired, transfer existing balances to a 0% card

Even with a good rating you are very unlikely to get £20K+ new limit to transfer the remaining debt.
So, don't rely on transferring and do your best to repay the debt in the first place.

sillyme

Sorry - suspect I'm not being clear at all!

I'm just trying to work out the cleverest strategy really.

I'm not thinking about transferring the total debt to another card. Just maybe paying off one card entirely, and then shuffling money across to it from the others - if the interest rate on the empty card is better.

Either way, I know I'll still have two rubbish interest rate cards for while.

Does that make more sense? Does anyone think that is that a sensible option?

zerog

Well, you only have £6000, so unless the 20.9% card has a credit limit of £21000, you should just pay off the 26% card, leaving it with £5600. If the 20.9% card has a credit limit of £15000, then you could potentially move the rest to that card. The interest is lower by 5% a year, so if the BT fee is 3%, this only makes sense if you can repay the entire card within 18 or so months.

sillyme

Aha! Precisely the sort of strategic I've been (unsuccessfully) trying to map out myself!
Thank you. The 20.9% card has a limit of £9500 so no room there.

I was thinking, if I paid off the 24% entirely and then transferred £6k of the 26% on to it it could work. Or is that idea COMPLETE nonsense?