Loan to pay off credit cards?

buffymad

I owe around £11,000 on my credit cards, some with low interest for the life of the balance transfer, some with normal interest rates. I generally pay the minimum amount each month unless I've got extra money from somewhere! I've been looking at taking out a loan to pay these off (and then cut the cards up) but obviously I'd prefer for the monthly payments to be quite a bit less than I'm already paying a month. Looked into personal loans but you only seem to be allowed 5 years for consolidating your debts. So I've therefore looked into secured loans where I could almost half my payments if I took it out over 15 years. Considering I worked out it would take me 16 years to pay off just one credit card making min payments, I don't think this option sounds too bad. But what's the best way to look into this - how do you know who's the best provider to go through? I've read good and bad about most providers so I'm none the wiser! Any clues on where to start or what else I could do? I'm not struggling to pay any of my bills but would just like to get rid of the credit card debts if possible as they're the bane of my life!!

sourcrates

I'll just refer you to another poster asking a similar question :

https://forums.moneysavingexpert.com/discussion/5502596

EssexHebridean

Buffymad wrote: »

I owe around £11,000 on my credit cards, some with low interest for the life of the balance transfer, some with normal interest rates. I generally pay the minimum amount each month unless I've got extra money from somewhere! I've been looking at taking out a loan to pay these off (and then cut the cards up) but obviously I'd prefer for the monthly payments to be quite a bit less than I'm already paying a month. Looked into personal loans but you only seem to be allowed 5 years for consolidating your debts. So I've therefore looked into secured loans where I could almost half my payments if I took it out over 15 years. Considering I worked out it would take me 16 years to pay off just one credit card making min payments, I don't think this option sounds too bad. But what's the best way to look into this - how do you know who's the best provider to go through? I've read good and bad about most providers so I'm none the wiser! Any clues on where to start or what else I could do? I'm not struggling to pay any of my bills but would just like to get rid of the credit card debts if possible as they're the bane of my life!!

If you're not struggling, don't even consider putting yourself in a position where you change unsecured debt into secured - that is REALLY not a good idea! Instead, sort yourself an SOA and work out where you can make savings on your current spends, sort the CC's in order of priority, and snowball to pay them off in the right order.

I assume you're currently still using the cards? If so, then you're definitely not a good candidate for consolidation. Cut them up - right now, then follow the usual steps for getting a proper budget in place and sticking to it, and getting things paid off.

buffymad

I've sorted out my finances and am paying what I can. Most of the cards are from a long time ago, they've been shifted time and time again to new 0% interest cards or low interest rate cards. There's only one I've used - and that's once in the last year when my Hoover broke!

So I'm not a serial spender and know how to work out my finances - but thought saving myself money in the long run (interest on all the cards over the period I'd be paying them off would come to more than total amount repayable on loan) might be beneficial! Plus if I'm better off each month I can put that aside to save for the next time something goes wrong.

bargainbetty

If you can refinance some of the debt onto lower interest rates but without converting it into secured debt, and know that you will not run up the card debt again, then I would say go for it. However, converting it into secured debt is not a good idea - if you become unable to pay your home would be at risk, and that's not an improvement. Plus, do you have sufficient equity in your property to guarantee you would get the funds you need?


See if you can get the remaining interest-bearing cards onto a lower rate. Use the snowball calculator to work out how best to approach your cards in order of cost. Also use the budget tools to see if you can overpay a small amount on the highest rate debt to bring it down more quickly. As each debt clears, you use the payment you would have made to bring down another debt - it makes it go a lot faster.


Best of luck

enthusiasticsaver

I agree with bargainbetty. You would be better off moving the credit cards on to a lower (or 0% deals) and trimming your budget so you can pay off more than the minimum to solve your credit card debt. If you are moving on to 0% and they are still not coming down then you must still be spending on them. Have you cut them up? I would suggest you do or maybe all except one and get rid of that when you have saved an emergency fund up.

It is never a good idea to consolidate debt and much worse to put unsecured debt on to a secured basis as this puts your home at risk if for any reason you lost your job or were not in a position to make the monthly payment.

Unsecured debt defaults do not result in homelessness but a default on a secured debt may well do. It will not save you interest in the long run to pay these off over 15 years.

I would suggest you post an SOA as if some of these debts are on 0% there is no way it would take you 16 years to clear on minimum payments.

enthusiasticsaver

http://www.stoozing.com/calculator/soa.php Here is the link to the soa.

http://www.whatsthecost.com/snowball.aspx Here is the link to a snowball calculator for your credit cards. Have you actually done this?