Ray Knowles

Ray_Knowles

Hello. I am very new here having only just joined a few minutes ago. I ask for advice. I want to get a loan to combine all my debts about £10,000.00 and pay it off over a few years rather than pay each individual creditor. All my creditors are credit card debts with one car loan. MBNA have the option of £10925. with 4.9% for the life of the debt and no transfer fee and the interest is Min monthly payment is 1% + £109.00 + 4.9%pa coming to £44.07 total int payment = £153.07. I would then pay £500.00 extra each month till the debt is cleared. This will save a lot on card interest and be affordable. My other option is to try and get a 0% credit card over 27 months and transfer for example £10925.00 and repay over 27 months. My question is...which is the more beneficial to me? The urgency is that the MBNA offer expires today

Candyapple

What is your annual salary? Are you a high earner?

The likelihood of you receiving a credit card with over £12k limit (most cards only allow 90% of the limit to be used for balance transfer) is slim to none, especially since you already have debt equating that amount in the first place.

If you can afford to pay £500 per month, why not carry on the way you are and just snowball your debts instead so that the ones with the most interest get paid off first:
http://www.whatsthecost.com/snowball.aspx

Ray_Knowles

Combined with my wife about nett £25,000. OK seems that the credit card option is a non starter. Thanks...hadn't thought of that drawback. Don't understand what you mean by snowball. The attraction of going for the MBNA option is that it is a very low interest rate 4.9% for the life of the debt as against the usual credit card rates on my other cards....so, very tempting.

dresdendave

Taking on more debt to clear existing debt rarely works unless you are very disciplined financially, ironically those with good financial discipline tend not to run up debts in the first place.


Snowballing, as suggested by Candyapple, tends to work better.
Order your debts by APR, each month pay the minimum payment** on all except the highest APR. On that one you pay as much as possible until it is cleared. Then repeat with the next highest APR and so on.


**Some people suggest paying min payment +£1 to avoid minimum payment marker on your credit file.

Ray_Knowles

That snowballing sounds like a good idea. However, my plan is not to get into further debt. I have now borrowed sufficient to clear all my credit cards. Say for example my total card debt is 100.00 which is attracting interest @ 19%. I have borrowed 100.00 at 5% repayable over an unlimited time as long as I make the minimum monthly payment. So in effect, I have borrowed 100.00 @ 5% to pay off a debts of 100.00 @ 19% which is a big saving and my level of debt has not increased. I intend to be very disciplined and pay a lot more than the minimum payment so it is totally cleared in under 2 years.