Consolidate credit card debts or not?

MrsA27

Over the years, due to poor management and various other factors I've built up about £18k worth of credit card debt. Amongst the cards I have, many of them were the big lenders with good 0% balance transfer rate. This means that I've ran out of lenders to apply to balance transfer and cut down the interest that is accumulating. One or two of the 0% balance transfer cards I already have are coming to the end of the deal as well so interest will start building up again.


As I can't apply for anymore balance transfer cards (having been rejected by a few already), I have been quoted a debt consolidation loan by Money Way (broker is Freedom Finance) for £15k with 13.9% APR, £341.96 monthly payment over 5 years. This means that the total cost of credit is £5517.37. I've not made the application yet so not sure if I will get it.


I've been doing some research online and there are some other secured loans or personal loans available for debt consolidation. I wonder if this is really the last and only option for me? If I can, I'd rather be re-directing the £400 odd minimum payment plus interest I'm paying each month for the cards to paying off a loan.


I wonder if anyone has done this before and find it a good/reasonable solution to my debt problem.


Any advice or suggestions greatly appreciated. I just want to get out of this and rebuild my life, all the worrying is certainly not helping with my mental health.

[Deleted User]

What are your current debts and rates?
What cards do you have?
What are you individual limits and balances?
What is your income?
What is your credit file like?

Consolidation is rarely the answer. You may be better at picking off the key problems areas and fixing it that way.

MrsA27

Hi zx81, thanks for your reply. Answer as below:


What are your current debts and rates?
-Current debt is around £18k, rates are between 21% to 23%.

What cards do you have?
-I have HSBC, Barclays, Tesco, Lloyds, Bank of Scotland, Halifax.

What are you individual limits and balances?
-these are estimates:
HSBC, £1500, balance £1400
Barclays, £7600, balance £7400
Tesco, £7500, balance £7000
Lloyds, £1000, balance £750 (0% interest for balance transfer coming to an end soon)
Bank of Scotland, £1000, balance £880 (0% interest for balance transfer just ended)
Halifax, £1000, balance £820 (0% interest for balance transfer coming to an end soon)



What is your income?
-more than £22k if include some overtime

What is your credit file like?
-not too bad actually according to Checkmyfile and Equifax

[Deleted User]

Out of those, Halifax and Barclays are probably the most likely to give you a BT offer once the card is clear. Halifax also have once of the smaller balances, so you may want to consider clearing that (if the 0% rate is almost up and the go to rate is not to much lower than the others).

You should make minimum payments plus £1 on all of the cards, and then throw all your spare cash at the one with the highest rate (subject to considering the above).

You obviously have a lot of debt in relation to your income, but have you tried for a further BT card? MBNA is the obvious card missing from your list where you could potentially get a decent offer.

In terms of your credit file - I don't mean any score you may have been given, but your actual file - any missed payments, overlimits, etc?

MrsA27

Deleted_User wrote: »

Out of those, Halifax and Barclays are probably the most likely to give you a BT offer once the card is clear. Halifax also have once of the smaller balances, so you may want to consider clearing that (if the 0% rate is almost up and the go to rate is not to much lower than the others).

You should make minimum payments plus £1 on all of the cards, and then throw all your spare cash at the one with the highest rate (subject to considering the above).

You obviously have a lot of debt in relation to your income, but have you tried for a further BT card? MBNA is the obvious card missing from your list where you could potentially get a decent offer.

In terms of your credit file - I don't mean any score you may have been given, but your actual file - any missed payments, overlimits, etc?

Thanks for that. I have applied for MBNA BT card in August but was rejected. I've not missed any payments in the past 6 years since I applied for the HSBC card and have not gone over the limit before.


I've seen the Nuba (part of MBNA) deal for BT and was considering it. However, having been rejected for a few BT cards in February and one in August, I was sort of waiting to reapply again but have considered debt consolidation as an option.


I get what you mean by clearing the Halifax one first then apply. How long will I have to wait after clearing previous card before applying for their new 0% BT deal with 41 months?

[Deleted User]

I wouldn't apply for a new Halifax. I would clear it and hang on to it - there's a good chance you may get offered a BT once it's clear and not used.

Of course you only have a low limit on there, so it would only solve part of the problem.

If you do choose to consolidate, you'll need to lose the cards so you can't run the debt back up, and identify where the original debt came from, or it will just creep up again.

Sam29

Dont apply for any extra debt. Consolidation rarely works because it doesnt deal with the problem. You would have to cut out ever using credit cards again for it to work and thats not realistic. It could potentially make things worse with big loan and credit cards debts. Basically its a myth that there are any quick fixes (apart from winning lotto!) its a case of slowly chipping away at what you have and slowly but surely things will get better. If it was me.i would pay a little extra each month to halifax (as previously mentioned) and the card charging highest interest. Then when halifax is lower balance they will offer you balance transfer deals and you can make an even bigger hole in card charging highest interest......keep chipping away and gradually they will all come down until you get to the stage where you will be closing cards and getting new balance transfer deals from all your exisiting cards. I would cut up all cards and only use one in emergencies. The key is not the balance on the cards but the interest being charged. This is the thing that will stop you paying it off. Concentrate on highest interest and snowball. Also chuck every spare penny at your cards to get em paid. So make a decision not to buy that coffee on way to work and throw three quid at the debt instead. Do this a few times in a month and you will be amazed at the difference it makes. Good luck

Dobbibill

Debt consolidation rarely works and unless it means you are paying less interest and have addressed the original cause of the debt. Many people, even with the best intentions, come back in a year or so in a situation twice as bad.

With that in mind I would say approach that direction with caution.

zx81 has given very good advice, pay just over the minimums on all cards and try and pay down the highest interest bearing card first. Bide your time with Barclaycard & Halifax, it will only be a matter of time once the balances reduce for the offers to start seeping through.

enthusiasticsaver

Taking out a loan will not help you and consolidating debt rarely works just delays dealing with the problem. Why have the debts arisen? Is it normal living expenses or can you pick out what has been spent on the cards?

Start by targeting the highest interest rate card and pay minimums on the rest. Look to cut costs as far as possible and maximise income. Can you take in a lodger or do a second job? Anything you can sell and throw at paying off the cards?

Ultimately you need to work out where your money is going so I would post an soa (statement of affairs) on the DFW board.

Marchitiello

What about a loan with your bank at 5% or less in order to cover most of the debt? You could pay the high interest cards then free up some credit and hopefully receive new offer for the remaining of the interest paying CC debts.

Candyapple

Marchitiello wrote: »

What about a loan with your bank at 5% or less in order to cover most of the debt? You could pay the high interest cards then free up some credit and hopefully receive new offer for the remaining of the interest paying CC debts.

Lol, OP earns £22k and is £18k in debt, no lender worth their salt is going to lend them anything because of affordability, unless of course it would be at an eye-watering APR and even then, would probably only be for £1-2k as OP is at high risk of defaulting.

The low limits given by Lloyds and Halifax suggest that you are not in their high bracket of target customer so you'd be unlikely to receive any balance transfer offer deals from them. Halifax have been sending me monthly BT and money transfers offers since March 2016 and I've had 2 from Lloyds in the past 3 months.

You need to use this: http://www.whatsthecost.com/snowball.aspx

Enter your debts in order of highest APR and stick to whatever it says.

Barclaycard are actually your best bet of getting a BT/money transfer offer so you might want to try and pay a bit more monthly towards that if you can and check your online account because they send you offers there every month.

You didn't accrue the £18k debt overnight so don't expect miracles. It will be a hard slog paying it off, but once cleared, it will be a valuable lesson.