Lots of creditors, what are my options?

matilda.cs

Hi All,
I'm looking to improve my debt situation...
Here is a list of -
Creditor, amount of debt, interest rate, current minimum payments,
Capital One, using £2988 of £3350 @ 34.9% (£109 minimum payment)
Vanquis, using £1434 of £1500 @ 39.9% (£65 minimum payment)
Aqua using £198 of £250 @ 35.9% (£5 minimum payment)
Next store card, using £476 of £2000 @ 25.99% (£45 minimum payment)
Lloyds CC £934 of £1000 @ interest free 9months+ remaining (£9 minimum payment)

Total debt ~£6030 of £8100 available.

I have a Default on my credit report which is due to come off in 2 weeks (I had another come off just last week) and I hope that'll therefore improve my options.

I think my best bet is to source a consolidation loan and pay off everything and close the accounts....but wondered what you lot think.

Obviously a loan would be better interest (assuming acceptance once the Default is removed)

My other option is to continue minimum payments on everything and then overpay on the highest interest creditor until the debt is paid and then start with the next highest creditor. The good thing about this is the amount of interest I pay will reduce each and every month, and the amount I can pay to creditors will then increase. The downside is that it requires good management of my finances.... Something a loan would be less dependent on?

The other thing I should say...these debts have accumulated due to circumstances in my family which no longer have a bearing. Ie, I am no longer dependant on my cards to live month to month. To ensure I don't start using credit again, I should keep monthly payments below £250 to leave me enough for the month. (£250 is comfortable from a SoA I recently did with 'er indoors)

I feel really positive, actually, as I am now in a position where my own defaults are about to come off, so my credit 'score' will improve, and also I am able to start reducing debts rather than be dependant on them. I just need a bank to see what I see...

Thanks in advance,

Neil x

HappyMJ

A consolidation loan can work as long as the debt that is paid off cannot be run up again. You must close any accounts that charge so much in interest. The length of the loan should match the same time as it would take to pay off the credit cards as your current minimum repayments. Usually 3 years....any longer and it will cost more in interest. That'll cost about £200 a month for 36 months depending on the interest rate you get....so you could save £34 a month. Personally I'd borrow £5,000 over 3 years pay off and close the high interest accounts and keep the outstanding balance on the interest free card then save up as much as possible over the next 9 months and pay it off in full at the end when it reverts to a higher rate.

matttye

Debt consolidation loans are bad news for a lot of people. Many people take out the loan then run up debts on the cards again, thus just having more debt. Only you can say whether you're likely to do that or not, but think long and hard before rushing into anything.

I think your plan of just paying off the highest interest creditor is a good one and you seem to be managing okay so far; just keep up with it.

matilda.cs

Thanks, but how are you working out that my currents payments would clear my total debt in 3years? I presumed it'd be a lot longer?

Thanks Matttye,
Obviously my credit score will present other options though? Surely they're worth investigating?

matttye

matilda.cs wrote: »

Thanks, but how are you working out that my currents payments would clear my total debt in 3years? I presumed it'd be a lot longer?

Thanks Matttye,
Obviously my credit score will present other options though? Surely they're worth investigating?

There are other options but all involve borrowing more money. If that's the route you want to take, I'd suggest going for a 0% balance transfer card rather than a loan.

Make sure you wait until the default has dropped off all three credit files before you apply for anything.

You said you did an SoA. If you want any suggestions on where to cut back, you could post it and people here will offer suggestions.

matilda.cs

Totally happy with SoA, and available finances.
Part of the initial problem was debt belonging to my partner, which has now been written off. (Hence I'm sure there is nothing we can do to cut back spending) - there is no financial association between us.

I thought about a balance transfer card, but I'm not likely to get £6000 credit limit on application, am I? Surely it's easier to get a £6k loan than a £6k crediit card?

matttye

matilda.cs wrote: »

Totally happy with SoA, and available finances.
Part of the initial problem was debt belonging to my partner, which has now been written off. (Hence I'm sure there is nothing we can do to cut back spending) - there is no financial association between us.

I thought about a balance transfer card, but I'm not likely to get £6000 credit limit on application, am I? Surely it's easier to get a £6k loan than a £6k crediit card?

You already have £934 on an interest free card.

£6,030 - £934 = £5,096 left on cards charging interest. Even if you could transfer half of that to an interest free card you'd save no end in interest.

If you leave your debts on cards you can get another 0% card later to move more of your debt, unless you're able to get one that will take the whole £5k. If you get a loan then you'll be stuck paying the interest on that no matter what.

matilda.cs

Just completed https://www.whatsthecost.com's snowball thingy.
Really really good tool.
I need to check on interest rates to be sure, but I think I can be debt free in under 3 years....especially with a balance transfer card. Exciting times