advice please on best way to pay off credit card/overdraft debt

lizzymouse

hi
I would appreciate any advice on this :

this is my current personal debt that I owe

£900 with my current account overdraft (arranged limit is £1000) with HSBC bank

£2232 credit card debt with HSBC currently on zero percent interest, this deal ends in November this year

£1793 with Barclaycard, no deal, just paying the normal interest rate.

so my debt altogether is near enough £5000

Im going to see HSBC this week for a chat to see what they can offer me but im looking to just find the best way to pay this off and get it a bit under control.

obviously, I know the most important thing is to stop adding to it, and I can do this and afford to pay off a fairly substantial amount per month whilst leaving myself enough to manage on reasonably comfortably.

I get confused whether its best to go for a loan and pay off the overdraft and 2 credit card debts with the loan money and consolidate it into one amount and have a fixed amount to pay each month - or, am I better trying to extend or get another 0% credit card transfer deal if HSBC will extend it for me or to try somewhere else.

ive been looking on line and there seem to be some good deals for loans with Hitachi finance who I used before to pay something off , also a couple of other loans that seem to charge around 6-7% interest which seems reasonable and cheeper than credit card interest rates.

my overdraft now is getting towards its limit so I just want to find the best way to loop that in with these 2 credit card debts and find the cheapest way to pay it off.

any advice appreciated, thank you

Maestro.

Whatever you do, don't agree to pay a partial settlement amount on one or more of the debts - that will be registered a default and ruins your credit rating for 6 years.

If you can afford to pay chunks of the debt off and still live your life then do it. Most expensive debt gets most attention until it's gone, then work your way down.

Taking out credit to pay off credit is a case of robbing Peter to pay Paul, unless you can secure a 0% deal and be disciplined, I wouldn't do it.

Gizmo247

I would clear the overdraft first as this is your flexible cashflow mechanism and it is something the bank can recall on demand. Once the overdraft is restored you then have a buffer to tackle your other debts.

I'm not sure that talking to HSBC about it will help, it may only raise a flag with them that you are in trouble. They are unlikely to lend you more money or to feel sorry for you and give you a preferential interest rate. Perhaps it is best to talk to one of the debt charities first.

CLAPTON

what is the OD costing you each month?

what is the APR of the barclaycard

how much can you want to pay off the debts each month?

what is your income?

CumbrianWolf

I would look into your credit history, and dependant on your salary and how much utilisation you have on your cards (how much of the credit limit is being used) you can get an idea if you can get another card with a decent 0% offer.

Ive been doing similar rightly or wrongly, and there is two approached I take, the latter requiring the most discipline.

1. Look for a long 0% balance transfer cards and use it to pay off your other cards. An immediate relief on the interest you pay on one of your cards. However this will not address the overdraft on your account (unless it has a super money transfer facility)

2. Look for a all rounder card giving you balance transfers and purchases. Use it for all your day to day spending, gain the perks for doing so (if any offered) and use the overflow in your cash account to pay of the cards in a few months.

Both in effect do the same, just different ways about it. It depends on your interest etc which works out best. I do the latter with my cards with discipline to manage my debt, but continue the spending and stooze the borrow cash on 0% to earn interest, but use it to clear the value on credit when the 0% ends.

CumbrianWolf

Gizmo247 and Clapton are asking an important question. How much is the overdraft costing, and what interest are you paying off each month on that one card. The answer to this will tell you which to pay off first. However as Gizmo247 says clearing that account is your flexible cashflow mechanism.

its may b impoartant to you to have hard cash available (be it accrewed from spending on a card pushing your cash account upwards). it was for me as it allows you to pay for tradesman etc that don't take card payment

lizzymouse

hi and thanks for replies

my overdraft costs me about £5 per month

my hsbc card costs me no interest at all, as on a 0% deal due to expire this November

the one that is costing me loads is the Barclaycard one - that is costing me about £30 per month in interest and fees.

so - is your advise to pay the Barclaycard off first because its costing the most, or , to get my overdraft down so I have some easily available 'cash' if I need it.

if I was really good, I could afford to pay off £200 per month off all my debts, but knowing that I cannot be that disciplined I would rather say I can pay off about £120 per month and keep some back for extras rather than adding to the credit card debt.

I am going to go see HSBC, even though someone suggested it might not be the best idea, they were quite good when they arranged the 0% credit card interest thing before and they are my current account people so I feel I should go to them first to see what they can offer but I know to shop around.

CLAPTON

well, even without interest if you only pay 120pm on a 5000 debt then it will take
5000/120 = 42 months (3 years and 6 months) to clear the debt

as it is you are paying fees on two of the debts and will start to pay on the HSBC card in November so you are probably looking at 5 years or more before paying off these debts.


without knowing your full circumstances maybe it's time to look a little more seriously at paying more back and clearing the debt faster.


what is the APR of the Barclaycard?
what will the HSBC APR be in November?

StuC75

How much a month are you currently paying to the 2 cards as monthly payments. Add this to what you can safely overpay each month to get the true amount you could commit to. This can give you an idea of how long your are looking at to repay these.

Compare the Apr's on the cards to what rates you could have with a loan or credit card (although the deal periods on those might not be long enough for you)..

Your bank will know more about you in terms of what they could readily provide - though it can be an idea to check how competitive anything they offer you is with the rest of the market..

Whats more important is that you seem intent to not repeat this again. It can be so tempting to revert to form and run up the balances again - so either look to use credit cards for there perks only, or close off the accounts..

That way in another year or so it doesnt become a 5k on loan, and 5k again on cards & od...

RobertLamb61

some good points, but from experience when 0% deals finish it can be hard. Try and pay down the one that is costing you most, try and move the 0% to a similar deal if you can and don't flag it up with any of them until you really need to, ie can't afford or fall behind with payments.

CumbrianWolf

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lizzymouse wrote: »

hi and thanks for replies

my overdraft costs me about £5 per month

the one that is costing me loads is the Barclaycard one - that is costing me about £30 per month in interest and fees.

so - is your advise to pay the Barclaycard off first because its costing the most, or , to get my overdraft down so I have some easily available 'cash' if I need it.

Its finding the right balance for you. Always pay off whats cost you the most first, you'll pay less in the long run. But allow yourself free withdrawl cash and the lowest fee i.e. your overdraft for emergencies/when cash is needed.

Ideally we would have a pot of money for emergencies but this isn't always possible when clearing a bit of debt.

Have you/are you willing to consider a balance transfer or all rounder credit card. Its possible to in time move your overdraft deficit and debt on the card charging interest to a new 0% card for no fee or a nominal fee depending how you do it/which card.[/FONT]