Friend in need...

aimex

Hey guys, hope i am posting in the right place.

My friend has recently just split with her other half and has left him. As a result she has 3 debts in her sole name which she is currently trying to pay off, but now she has left is strugglying to pay these on her own as she is currently on maternity leave.

I have some of the info and was wondering if it would be better if she consolidated the three debts so that her monthly payments and APR's were lower. Not really got much experience with this myself but am hoping one of you MSE'ers will do.

The debts are as follows:
1. Abbey National Credit Card - £2989.95 (APR 20.9%)
2. Capital One - £688.40 (APR 29.9%)
3. Argos Store Card - £861.15 (APR 25.9%)

TOTAL = £4539.50

I think she is currently paying back around £180 per month on all three. If she could lower this by consolidating and getting a lower APR i think this would help her out no end.

She has looked into a loan with Lloyds for around £5,000 and i think the payment scheme is £110 for 5 years. ANyone better this? It wouldnt matter if the loan is for a bit more than the debts as she could use this to help furnish her new place.

Thanks guys, you are legends.xxxx

mrsspendalot

The general advice is never consolidate as it nearly always works out more expensive than paying off the original debt. Ask your friend to provide her income and outgoing details and then we should be able to give better advice xx

Kevicho

Thats not necessarily true, consolidation is useful as long as the other credit sources are cancelled.

Getting a good deal with a good APR (would be much better that these 20%+ rates) would be beneficial, if again the other debts were killed so no more debt could be run up

Kevicho

Ok the loan above equates to 6600 if she takes 5 years to pay it back, is there acheaper loan she could get?

Will there also be fees for early settlement (with any luck she will be able to payt this off quicker)

I would suggest you help her fill out an SOA to try and get her that extra monthly cash she can use towards repaying this debt.

Also another point, would be to NOT get more than the total debt, as this will leave tempting extra cash, which could easily be spent

mrsspendalot

Thats what I thought when I worked it out Kevicho - its almost half as much again, which seems daft if there are other ways of paying it off quicker and cheaper

Kevicho

Bit of extra digging for you here

http://www.quidco.com/finance/unsecured-loans/alliance-and-leicester-unsecured-personal-loans/

here you can get 66 pounds cashback, and also the loan would work out cheaper by 600 quid, so
unless this can be beaten and this is the path she wants to go down, then this would be a good idea

Kevicho

mrsspendalot wrote: »

Thats what I thought when I worked it out Kevicho - its almost half as much again, which seems daft if there are other ways of paying it off quicker and cheaper

You need to take into account interest fees on the cards, and also if shes struggling financially to meet 3 different card payments already, the possibility of fees for any late payments (which would include making interest rates higher by penalty)

To me this is good in the other way as its easier to manage, 1 payment versus juggling 3.

It was the first thing i did as a DFW, i consolidated most of the higher interest debt and left some low interest debt to repay, which helped me organise, but also got me into the DFW groove

Kevicho

One more thing to note, if possible and she can squeeze extra money a month, try to decrease he length of the loan, as it will save lots of interest in the long run.

Good luck (try to get her on here and post an SOA)

aimex

Thanks for the replies guys.sorry if im being silly but what is an SOA?

She is a full time mummy and does not currently work. she is also currently living with a friend until she finds somewhere to live and therefore its perhaps not a true reflection on her situation. she would get housing benefit to cover her rent and would then be elligible for increased tax credits. her income is only what she receives in child benefit (120 ish per month) and tax credits, which are being reassessed. she is not receiving any child maintenance at the mo and this is in hands of CSA.

thanks so much for your help, she will appreciate it xx

tyllwyd

What is the APR on the Lloyds offer? I keep getting junk mail from Lloyds offering me loans, and in one mailing they had 'typical apr 6.5%' in big letters all over it, but when you looked closely the loan they were offering me was for 13.5% (or something similar ... I threw it in the bin!) I used a loan calculator, and for a payment of £110 on a loan of £5000 for 5 years, the APR they used was 12%, so if she is considering taking a loan at a rate like that, she should definitely do some shopping around.

aimex

Thats interesting to note tyllwyd, youre right. You have to be so careful dont you, the banks are sneaky!! x