Best option - Consoladating CC & Catalogue debts

Hopefulftb_2

Hi

I am just after some advice

Between myself and my husband we have 10k on various Store/catalogue/Credit cards

We really need to pay these all off in one payment per month hoping to reduce it from £565 minimum a month to £150/200

We have just successfully bought our first house and have an average credit rating .

Thanks in advance

jonesMUFCforever

Pop over to the debt free wanabe section - they will help you.

TheMoney

What is the current APR on the cards? Obviously the best option would be looking at a 0% balance transfer card, but I'd also consider a loan to cover the debts. With the loan, you have a guaranteed end date, a fixed monthly payment, but your probably going to be looking at around 15% APR.

matttye

TheMoney wrote: »

What is the current APR on the cards? Obviously the best option would be looking at a 0% balance transfer card, but I'd also consider a loan to cover the debts. With the loan, you have a guaranteed end date, a fixed monthly payment, but your probably going to be looking at around 15% APR.

Agreed with a balance transfer card.

A loan will just increase the debt, whereas a 0% card will reduce it (less interest).

CLAPTON

10,000 being paid at 150 without interest will take over 5 and half years


do you really want this hanging around that long
will no new debt start up in that period?

TheMoney

Essentially your decision must be based on how likely you are to accrue new debt, and your credit worthiness. If you take out a loan and pay the debts, I'd advise atleast a £250 p/m repayment and you've got a guaranteed end date, and most likely a lower APR than your currently paying, plus it's all in one place. 0% cards can be difficult to obtain, and interest free periods may be shortened dependant on how the issuer see's your credit rating. Both solutions would then leave you with all those cards still available to use, only now with the full limit available to you. Best advice is whatever route you take, close down all the other cards straight away. I personally would go with the loan, I believe that is the best option as you must pay a fixed amount every month, and your debt is gone after a few years, whereas credit cards are very easy to spiral out of control when you have an available balance.

ValHaller

jonesMUFCforever wrote: »

Pop over to the debt free wanabe section - they will help you.

Not only that, you will be strongly advised not to consolidate.

Consolidation has ruined may people financially, because they reduce their monthly outgoings from £565 which would be paid off over a few years to £165 over a very long period. And then they take out more credit with the £400/month they have left over.

And I cannot for the life of me see why having a single payment each month is such a big driver for those trying to consolidate.

Hopefulftb, you need to pay down the debt where it is. You need to clear your overdraft first and stay out of it. You need to stop taking out new credit. And as each debt is cleared, you need to put the money you were spending on that to clearing the next debt.

Remember that debt on cards has low minimums compared to the same debt as a loan. Consolidating keeps you on a treadmill for longer. Rather than consolidate - and at the amount you need, lenders may be very reluctant - you should think of shifting debts individually to lower APRs. A small loan to clear catalogues, a lower APR card with a 0% deal to clear a higher APR card.

TheMoney

Whether you consolidate or keep going as you are now, either way you will eventually be left with all the available credit on the cards to run up again. Each time you make a payment on the card, your then freeing up more credit you can use. If you take out a loan, then close the cards straight away, you don't have any option of running up credit on those cards anymore. This works best as you can pay off all the cards while your still in the mind frame to clear your debts, so you can close the cards before you change your mind.

dealer_wins

Consolidation is catastrophic for most people.

You consolidate £10000 of debt into one 5-7 year loan, then by year 2 you have spent another £10000 on cards, overdrafts etc

In my 20 year banking career I saw it time and time again.

As others have said go to the DFW board, and make a real effort to live within your means and get your debt paid off asap.

You will save untold £1000s in interest over the rest of your life by living within your means and NEVER borrowing again. (and its much less stressful when you're not scared of bills hitting the mat every day!!)