Consolidating debt with personal loan

CloakedSnitch

Hi all—I return to these forums after a long break. You were all extremely helpful some years ago in advising on a debt. I look forward to more excellent advice!

After some years of education, and training I've entered a well paying graduate job. This has given me breathing room to begin shifting some accumulated debt. But I think there's a better solution. Outstanding debts as followed:

- £2500, HSBC credit card debt, defaulted on it in 2008 and have been paying to a collection agency at £5/month no interest for about 5 years. They regularly chase for updates on the payment plan, I duly ignore them. They offered an early settlement payment of £700 last December, I ignored that too. Am I silly to think that they may one day just write it off completely? Or shall I continue paying £5 month for the next 39 years?

- £900 student overdraft, due to end in September. Charge to have it after that will be £23 month. Slowly creeping out of it, but not quick enough to avoid having to pay

- £4500 credit card, interest is 18.6%. Paying this off at £200 month, but interest is accumulating heavily

Due to a lot of silly debt over the years my credit score has been dented, but has recently climbed to over 500. It is however still too low to move the credit card debt to a zero interest card.

My new plan is to get a c.£7000 loan. Most providers seem happy to give me one. I can then get out of my overdraft, and settle the credit card. The interest on this loan would be around 4.2%, which comes out very reasonable over 5 years. My monthly payment would be £120/month, saving me £80 compared to my credit card payments. I would then be able to cancel the overdraft, and lower the limit on the credit card. Which should please the credit agencies in the medium term.

What negatives am I missing from this plan?

A

DCFC79

Its all very well coing up with the plan but its sticking to it, being disciplined not to spend the "loan" on something flashy, consolidation loans rarely work (the forum is littered with posts from users who have tried it). Once the credit cards are paid off close the accounts.

Re the HSBC card ask them for a settlement figure, if you continue to pay the £5 a month for 39 years you will have wasted £2340, a settlement figure may be less.

A loan of £7500 may get you a better rate, have you definitely got an offer of 4.2% ?

CloakedSnitch

DCFC79 wrote: »

Its all very well coing up with the plan but its sticking to it, being disciplined not to spend the "loan" on something flashy, consolidation loans rarely work (the forum is littered with posts from users who have tried it). Once the credit cards are paid off close the accounts.

Re the HSBC card ask them for a settlement figure, if you continue to pay the £5 a month for 39 years you will have wasted £2340, a settlement figure may be less.

A loan of £7500 may get you a better rate, have you definitely got an offer of 4.2% ?

Thanks for quick reply!

I take the first point, but I'm determined to shift these high interest debts. So would immediately pay the outstanding balances, there would be little left to splurge.

Take the point on the HSBC debt, I could probably haggle them down fairly low and also settle this from the loan.

Zopa have a rate listed as 4.1% on anything up to £7500.

DCFC79

CloakedSnitch wrote: »

Thanks for quick reply!

I take the first point, but I'm determined to shift these high interest debts. So would immediately pay the outstanding balances, there would be little left to splurge.

Take the point on the HSBC debt, I could probably haggle them down fairly low and also settle this from the loan.

Zopa have a rate listed as 4.1% on anything up to £7500.

Give Zopa a try but be warned you may get offered a higher rate ( the same with other lenders ). Zopa is different from the other lenders eg banks in that the money is from those who invest in Zopa so the criteria may be stricter.

Have you looked at your spending to see if you can cut back on anything ?

Good luck

Tyrone_Black

If the default is from 2008 and you now have a well-paying job, could you try to get a 0% balance transfer? Virgin are doing 32 months for a 1% fee.