Best Way Forward

Noobie2011

Thanks for all your replies and yes my debt as you call it has increased a lot since maybe my last posts a few years ago.

However for me it is different as in a few years back I was sugar coating alot of my financial issues and was really struggling to survive.

Now and it may not look like it but I am in a position where I can afford to pay my debt every month(yes the interest rates are high and the credit cards are minimum payment) and still have enough money left over to live on for the month which is a far cry from where I was a few years back. But I will admit as my income has risen so has my debt and although most people would not agree with it and I may do it different if I went back in a few years I do have things to show for my debt unlike before such as a house, nice car, nice holidays and just had a beautiful wedding and honeymoon.

I have been through all my finances over the last couple of weeks and not including the credit cards and fashionworld all my other debts will be gone at worst in 5 years. And as someone mentioned as one debt goes then I can add that money to another debt and so on so I have an option to heap more money into the loans or to the credit cards. Yes if I were an outsider I would think the likelyhood is this guy is going to just waste the extra money or increase his debt back to where it was as loans go but for me that is not the case now. It is no excuse but most of this debt was built up quickly over the last 6 months mainly and was aware of what I was doing and always had a plan of what to do once I got to here.

Yes I would be better off with say £1000 of debt rather than what I have but I have learnt it is not just about the amount of debt you have but more importantly your mindset as until you get in the right frame of mind you will never sort your debts.

One question I did have as I understand my loans etc and the interest and when they will be finished but I cannot seem to get my head around the credit cards. I know the minimum payment is not ideal but I am trying to work out actually how much of my payment is paying interest and how much is reducing the debt. So for my situation I pay nearly £600 a month say on credit cards, lets say all are maximum spent. I then basically take the Interest charged every month off the actual payment which leaves the the amount that is actually paid off the debt providing I dont spend it. Now I know as the debt slightly reduces so will the payments etc but was thinking my initial calculation was a good starting point. This means however I worked out that of the £600 I pay every month around £250 of that is actually paying off the debt if that sounds right??

sleepless_saver

Noobie2011 wrote: »

One question I did have as I understand my loans etc and the interest and when they will be finished but I cannot seem to get my head around the credit cards. I know the minimum payment is not ideal but I am trying to work out actually how much of my payment is paying interest and how much is reducing the debt. So for my situation I pay nearly £600 a month say on credit cards, lets say all are maximum spent. I then basically take the Interest charged every month off the actual payment which leaves the the amount that is actually paid off the debt providing I dont spend it. Now I know as the debt slightly reduces so will the payments etc but was thinking my initial calculation was a good starting point. This means however I worked out that of the £600 I pay every month around £250 of that is actually paying off the debt if that sounds right??

Try the Minimum Payment Calculator.

bennyhill_2

Without wanting to appear judgemental (I assure I'm not, and am definitely not as I've got my own money issues), but you appear to have a grasp on the basic concept of credit card repayment, but just for a rough example's sake (and I'll pick on Vanquis card because I know their interest rates are horrific, and I'll choose the mean rate of what they tend to offer).

Balance (assuming you don't re-use it since your last payment of £115) = £1885
Monthly payment = £115 this assumes you keep this payment figure going and do not pay just the minimum!
Yearly equivalent interest rate = 49.9%

This would take 29 months to pay off, and would cost in charges (interest):
(29 months * £115 per month) minus the original value borrowed (£1885)

Or £3335 - £1885 = £1450, in other words to 'up-front borrow' the £1885 it's going to cost you an extra £1450, or almost the same amount as what you borrowed on top!

If you only ever pay the minimum these debts will be with you for a lifetime!

Now apply that to each of your debts and you'll soon see the amount you're going to end up paying is not insignificant. I'm not saying you maybe haven't considered this before, but I'd work out the repayment period for each of the debts using http://www.thisismoney.co.uk/money/cardsloans/article-1633399/Calculator-Credit-card-repayment-reality-check.html and then immediately stop using the credit cards to fund your lifestyle. This is the only thing that worked for me. Sure I have 2 credit cards, but they just aren't used. I need to keep them open so that I know I have the ability to spend on them, but I also truly understand the consequences of spending on them (I'll only use them if I can be 100% sure I can clear the balance when the statements arrive).

HTH?

Noobie2011

bennyhill wrote: »

Without wanting to appear judgemental (I assure I'm not, and am definitely not as I've got my own money issues), but you appear to have a grasp on the basic concept of credit card repayment, but just for a rough example's sake (and I'll pick on Vanquis card because I know their interest rates are horrific, and I'll choose the mean rate of what they tend to offer).

Balance (assuming you don't re-use it since your last payment of £115) = £1885
Monthly payment = £115 this assumes you keep this payment figure going and do not pay just the minimum!
Yearly equivalent interest rate = 49.9%

This would take 29 months to pay off, and would cost in charges (interest):
(29 months * £115 per month) minus the original value borrowed (£1885)

Or £3335 - £1885 = £1450, in other words to 'up-front borrow' the £1885 it's going to cost you an extra £1450, or almost the same amount as what you borrowed on top!

If you only ever pay the minimum these debts will be with you for a lifetime!

Now apply that to each of your debts and you'll soon see the amount you're going to end up paying is not insignificant. I'm not saying you maybe haven't considered this before, but I'd work out the repayment period for each of the debts using http://www.thisismoney.co.uk/money/cardsloans/article-1633399/Calculator-Credit-card-repayment-reality-check.html and then immediately stop using the credit cards to fund your lifestyle. This is the only thing that worked for me. Sure I have 2 credit cards, but they just aren't used. I need to keep them open so that I know I have the ability to spend on them, but I also truly understand the consequences of spending on them (I'll only use them if I can be 100% sure I can clear the balance when the statements arrive).

HTH?

Thanks for your response and I expected people to air their opinions as why else would I have posted up but your post does really help as it points out the fall back of just paying the minimum without being criticising or up their own ar*es like some post haha

I know that with the credit cards I have and paying the minimum will in the long run scare me to death if I worked out the interest so I will be changing from paying the minimum to at least a fixed DD so as my debt goes down I will pay the same every month rather than the CC company reducing the payment. This is my 1st plan of action but as other Loan debts reduce my plan 2 is to start using the excess money to plough into the credit cards starting with the higher interest ones. My other idea and may not work is as I get a good sum of available credit on the lower interest cards I may use that money to pay more off the higher interest cards. Now this does not reduce the debt but I would assume by moving the money around it wil reduce the interest.

If my calculations are right on my credit cards then on a monthly basis where I spend nearly £600 on minimum payments I end up with an average of £250 available. Now straight away I am not going to use any of that on just spend unless it is an emergency but it does maybe give me an option to try and use that money to pump into other debts if it means I lower high interest credit as opposed to leaving the money sitting on low interest credit if that makes sense.

KID77

Hi Noobie
Reading your post reminds me of myself over the last few years, I was able to meet minimum payments and although was still using money from credit cards to live, I always thought it would work out somehow. I hoped my debt would come down a bit, mortgage come down and I can remortgage to consolidate all of my debt. However because of the volume of debt I had, I wasn't able to remortgage so last year i looked into a secured loan but that didn't come off which I am so glad about now. I then continued thinking things would get better until May this year when I maxed out our overdrafts and had hardly any money left on credit cards, I got the fright of my life. I couldn't believe how stupid I had been over the last few years, I cried for weeks, broke down at work and it was probably the hardest experience of my life so far, sounds very dramatic but I felt I could lose everything.
Anyway, I spoke to my boss at work who I am close to and he suggested talking to a debt charity which I did (this has never occurred to me before). They suggested DMP which scared me but I spent the weekend on the DMP Mutual Support Forum reading about real experiences and it made me realise this was the best and only option. Our credit rating wasn't allowing us to get any more credit anyway so I decided that I couldn't worry about my credit report for now, the main focus was to keep our house and pay an amount to our debts each month which allows us to live without needing credit.
We started our DMP just this month and i have gone from paying 1100 per month to a few hundred pounds per month. Okay my DFD is pretty far away but my husband gets an annual bonus plus I expect wages to rise so we can bring this forward and it will be the first time in years that the debt should come down rather than going up.
I am not pushing you towards a DMP but just wanted to share my experience with you as for a long time, I thought I could control this and something would come along but it never did.
My advice would be looking at the snowball calculator to see if you can do this without some sort of debt management plan but maybe spend some time of the DMP forum reading other peoples comments and see what you think.
Whatever you do, I hope all works out well for you and someday you will be debt free like I plan to be :-)
K
xx

Noobie2011

KID77 wrote: »

Hi Noobie
Reading your post reminds me of myself over the last few years, I was able to meet minimum payments and although was still using money from credit cards to live, I always thought it would work out somehow. I hoped my debt would come down a bit, mortgage come down and I can remortgage to consolidate all of my debt. However because of the volume of debt I had, I wasn't able to remortgage so last year i looked into a secured loan but that didn't come off which I am so glad about now. I then continued thinking things would get better until May this year when I maxed out our overdrafts and had hardly any money left on credit cards, I got the fright of my life. I couldn't believe how stupid I had been over the last few years, I cried for weeks, broke down at work and it was probably the hardest experience of my life so far, sounds very dramatic but I felt I could lose everything.
Anyway, I spoke to my boss at work who I am close to and he suggested talking to a debt charity which I did (this has never occurred to me before). They suggested DMP which scared me but I spent the weekend on the DMP Mutual Support Forum reading about real experiences and it made me realise this was the best and only option. Our credit rating wasn't allowing us to get any more credit anyway so I decided that I couldn't worry about my credit report for now, the main focus was to keep our house and pay an amount to our debts each month which allows us to live without needing credit.
We started our DMP just this month and i have gone from paying 1100 per month to a few hundred pounds per month. Okay my DFD is pretty far away but my husband gets an annual bonus plus I expect wages to rise so we can bring this forward and it will be the first time in years that the debt should come down rather than going up.
I am not pushing you towards a DMP but just wanted to share my experience with you as for a long time, I thought I could control this and something would come along but it never did.
My advice would be looking at the snowball calculator to see if you can do this without some sort of debt management plan but maybe spend some time of the DMP forum reading other peoples comments and see what you think.
Whatever you do, I hope all works out well for you and someday you will be debt free like I plan to be :-)
K
xx

Hi there, thank you for this post as it does open another option if my situation gets worse. I will have a read and see what they say on there.

I am going with the snowball effect and hopefully that will work for me. Yes it will mean I cannot take anymore debt out, use any extramoney from finished loans on other debt and also not spend any money on the credit cards so they are gradually going down with my fixed DD. The other thing I am then looking at it moving money available from low interest CC's to high Interest CC to bring the Interest down slighty.

Can I ask you a question though, you say you could not remortgage. I am a bit confused with this whole Mortgage things, when you say remortgage do you mean you tried for a 2nd secured loan on your property against the equity in your house. The reason I ask is my only worry is my current Mortgage of 2 years fixed ends in October 2016 and I am afraid is their a possibility I cannot get a new deal. Does this ever happen as I will still be in a position to pay the mortgage and a much better postin than now if all pans out but the problem is my debt will much higher than it was.

[Deleted User]

KID77 wrote: »

I hoped my debt would come down a bit, mortgage come down and I can remortgage to consolidate all of my debt.

IMO, turning unsecured debt into secured debt (especially secured on your home), is never a good idea.

[Deleted User]

Noobie2011 wrote: »

The other thing I am then looking at it moving money available from low interest CC's to high Interest CC to bring the Interest down slightly.

If you are snowballing, then you should already be paying all available money (beyond minimum payments) to the highest APR debt(s).

Noobie2011

Bedsit_Bob wrote: »

If you are snowballing, then you should already be paying all available money (beyond minimum payments) to the highest APR debt(s).

This is what I am planning on doing but only read about it the other day and not sure if I can do with my situation.

Initially as said I am concentrating on the basics which is pay all standard payments on loans I have and also the turning the minimum payments I pay now on CCs into fixed DD so that payment does not go down every month. Then once my loans start finishing with the 1st one finishing in just over a year I can put that money into something else to pay it off quicker. Likely I would imagine this would be best to go to the next highest interest debt and so on.

The snowballing thing using available on Cards was another side option if it helped also. It may not work for me as my situation with CC's are currently across them all I have around £250 available(not planning on using this on any spend) and on a monthly basis making the payments I do it works out around £250 a month more becomes availble again. So itihn 2 months I will have £500 available across all CC's. So my initention is not to tuch this money for spend but it had me thinking could I somehow use this money to shift around to pay off the high interest CC's rather than leaving a lot of available money on low interest CC's when I have deb that could be reduced or cleared on high interest cards.

[Deleted User]

Are you talking about moving debt from high APR cards, to lower APR cards, or snowballing payments?