Loan or Credit Card

blakeyjo

Hi all

I've currently got £18k debt broken down as follows:

Lombard Direct loan - £10k taken out 12 months ago paying over 7 years; paying back at £180 per month

M&S Credit Card - £1450; 4.6% per annum for life of balance; paying back £50 per month

Tesco Credit Card - £1400; 0% for 12 months; paying back at £50 per month

Virgin Credit Card - £6700; 0% for 6 months; paying back minimum payment of £150 per month

Total paying back per month is £430.

Is there a better way I could be dealing with this? When the 0% ends in four months time on the Virgin Card should I go for another credit card or just get a loan and forget about it? I can afford the £430 per month but can't afford any more as it's leaving me a bit tight every month, but not to the extent where I use my credit cards. They are kept at home so don't have any temptations when I'm out shopping!

Many thanks

angelavdavis

Hi,

Have you had a go at posting your SOA so the good folk on here can review your outgoings and help free up some extra cash to overpay the debts?

My advice would be to go for low life of balance transfers - mainly because now that BTs without transfer fees are a thing of the past, you might as well go with a lower % than the hassle of having to keep moving the accounts and incurring 2-3% fee each time.

Have you entered your debts on the snowball calculator to see the order that you should be paying them off in? It will help calculate what amounts you need to pay to settle the debts at the earliest possible date.

Have you anything to eBay to raise funds to throw at the debts?

I personally, would not recommend taking out a loan - you will be hard pushed to find one at a lower/equivalent rate than your debts currently sit at and there are plenty of stories on here about people (including me!) who consolidated and regretted it later! While it might seem worthwhile to reduce the short term payments, the overall interest paid would far outstrip the real cost. In reality, if you were to take out a loan at a rate of 7.4% (eg Northern Rock unsecured rate) over ten years that will cost you £212.72 a month. However, you'll pay a total of £7,526.99 in interest, which means that you are actually paying back £25,526.99 :eek:.

I would also advise cutting up the credit cards - keep the bits in an envelope so you can piece together as much as possible. Just keep one credit card in a bag of water and put in the freezer so you have it in case of real emergency.

blakeyjo

That has helped loads - it was exactly what I was looking for. Just looked at the snowball website and it recommends I throw any spare money at the Virgin credit card. And not to consolidate. If I do this properly it will cost me £4642 in interest - saving nearly three grand on a loan!

angelavdavis

Good luck