Some questions on remortgaging, credit cards and overdrafts

Michelle2014

I am trying to get organised with my finances with the goal of reducing my debt and becoming debt free! I have had no problem with making my monthly payments in fact I generally have been overpaying but would like to clear my debt as currently paying around £300 a month in debt repayments.

I am currently putting any spare money towards my Next storecard as that has the highest interest. The balance was about £398 and I have reduced it to £200 in about a month.

We are trying to get a remortgage on our shared ownership flat with Nationwide. We have a decision in principle and have made a full application via a broker last week. It would be so great if we get it as we will be moving from interest only to repayment but paying about the same due to a lower interest rate and longer term. Has anyone else been successful at remortgaging while having some unsecured debt? Our equity is about 15-20% of our share of the property. I have a loan of about £7k, and credit card debt of just over £5k. Our annual income is abut £50k and mortgage is around £95k.

After Next is paid off probably in 1-2 months, I want to focus my attention on my credit cards. I have a Barclaycard at 0% balance around £4.9k and a Nationwide credit card at £900. I could transfer the Nationwide balance to Barclaycard at 0% for a year and would just need to pay a 2.9% fee. Would this be a good idea?

I also have an overdraft facility on my current account - limit is £1400 and by the end of the month I am usually around my limit. I want to get rid of my overdraft as well or at least reduce the facility to £500. I am charged 50p a day everytime I am overdrawn so usually around £15 a month charges. What is the best way to repay the overdraft - save up £1400 and then transfer to my bank and ask for the overdraft to be removed? Or each month reduce the facility by £100 say? Is it best I focus on repaying the credit cards first?

All advice welcome!

HappyMJ

Having unsecured debt that you can manage is not a problem.

It's cheaper paying off debt as fast as you can and unsecured debt will not usually have a term over 5 years. If you secured the debt you may not qualify for a low interest rate any more due to a higher LTV ratio and it may cost more over the long term.

There are ways to reduce your overdraft but that will involve saving or by moving the debt to a credit card and never using the overdraft again. If you can get 0% on balance transfers you may be able to pay off an overdraft with that as well. Do that and reduce the OD to a token amount such as £100 for use only in case of serious emergency.

Michelle2014

Yes we are not looking to secure the debt at all. The purpose of our remortgage is to move to repayment. Separately, I then want to get the debt paid off as quickly as possible.

I have checked with Barclaycard and I could transfer the funds from my credit card to clear overdraft at 1.9% fee and that would be 0% for 6 months I think. If I do that I will certainly be contacting the bank to reduce the overdraft.

I am not going to do anything until the remortgage is sorted though as don't want to do anything to adversely affect that decision.

I am also doing a trial of YNAB at the moment to get finances in order.

Savingdad

Can you repay the overdraft amount you are looking at moving within the 6 month 0% time? If not you are just moving a cheap debt to an expensive credit card just for the illusion of paying it off.
I got offered 10 month 0% on my MBNA card so transfered £1000 to clear one of my overdrafts and then set up a 10 month standing order for £100 so its cleared before the 0% runs out.
I have another overdraft but I have paid off all my credit cards before tackling overdrafts because they seem relatively cheap to me.
Certainly I would be clearing other debts before overpaying on the mortgage unless its cheap debt with a lower interest rate than your morgage .