Best option for clearing Credit Card Debt?

vanillarice

Hi all,

First time poster here, looking for some advice.

I'm posting on behalf of my partner, who has recently opened up to me about the true extent of her credit card debt. We've been together 3 years now, and I've known from the start that she had this but didn't want to interfere as she said it was under control and she was paying off so much per month.

However she has now come to me as the level of debt isn't going down at the rate she wants, and her 3 card lenders are all charging ridulously high levels of interest - 1 @ 50% + monthly charge, and 2 @ 40%

In total between the 3 cards there is just over £10k outstanding. She is making at least the minimum payments and hasn't missed any payments, but late last year she did put more onto them as her money was tight for a couple of months - I've now said to her that wasn't the best move and to come to me if things are that bad again.

To help her out, I solely pay the mortgage/house insurance and we just split the bills.

Due to her poor credit rating, she isn't eligible for any decent 0% transfer cards, and certainly not any that will lend her enough to cover all 3 cards.

So this week she has got an appointment with her bank to discuss a personal loan, with a hope that they can look through her records and refer the application rather than just rejecting it based on credit score alone.

At present she is paying at least £500 per month across the 3 cards. A personal loan to cover the debt, spread across 3 years monthly works out at around ~£340 - so we're hoping the bank will see this and agree that she can easily afford the repayments. Obviously we know it's not guaranteed, but think this is her best shot rather than applying for several online, being turned down and it impacting her score even further.

To me this seems like the best and only option. Interest is fixed, payments are fixed, and you have a set end date.

Is there anything else I should be considering for her?

I've looked at the "snowballing" method, but this will require her putting in the maximum she can a month, whereas a loan will actually reduce her monthly payments.

I think essentially what she needs is a lump sum to get rid of these money grabbing lenders and make everything more manageable.

I sincerely hope I'm not coming across as "the controlling partner" as I'm not, I just have a good understanding of this area and want to help her out of debt so we can both live how we want to live!

Thanks in advance for any replies.

mumofthetwins

didn't want to read and run .. if she can transfere to a 0% card and then just plough as much as possible at it that would be a better option, consolidatuion loans are rarely as good thing (learnt that on here). I was going to get a loan but with the help of the guys on here I have transferred and just paying it off .. but if she does get a loan she will need to pass the affordability checks for the loan as well, I know its not as simple as can afford more than that at the minute.
lisa x

enjoyyourshoes

Could you both go to the next step and support her by repaying the debts?

She has come clean.

You are taking some of the brunt, mortgage etc.

Can she convince you that the source of the problem has been resolved (as debt is a symptom of a deeper problem)?

Can you then assist in throwing as much at the debt as possible? maybe restructuring the debt to be less dependent on high i interest card?

katie4

you'll find most people will tell you to avoid consolidation loans at all costs!
However I could not get any credit anywhere for 0% or loans i went to my local credit union and they have approved me for a loan no questions asked (i have been with them for a good number of years now though)


my interest has been greatly reduced and monthly payments more than halved which is a god send to me.


If you do get a loan to pay off the cards you have to make sure she 100% cancels the cards straight away to prevent any temptaion from racking them up again.


good luck!

vanillarice

mumofthetwins wrote: »

didn't want to read and run .. if she can transfere to a 0% card and then just plough as much as possible at it that would be a better option, consolidatuion loans are rarely as good thing (learnt that on here). I was going to get a loan but with the help of the guys on here I have transferred and just paying it off .. but if she does get a loan she will need to pass the affordability checks for the loan as well, I know its not as simple as can afford more than that at the minute.
lisa x

Thanks Lisa,

Unfortunately, the best option she was offered when using a "soft search" eligibility checker was a credit card of £1500, which will only clear half the debt of one card and we can't see it being of much worth.

vanillarice

enjoyyourshoes wrote: »

Could you both go to the next step and support her by repaying the debts?

She has come clean.

You are taking some of the brunt, mortgage etc.

Can she convince you that the source of the problem has been resolved (as debt is a symptom of a deeper problem)?

Can you then assist in throwing as much at the debt as possible? maybe restructuring the debt to be less dependent on high i interest card?

Thanks for the reply.

The source of the problem has gone (mainly her ex partner, wasted all his money and left her to pick up the bills) - but she also admits she spent some herself due to not being happy at the time. Thankfully, she is much happier with me

I would love to help, but it is towards the bottom of the options list.

I'm currently renovating the house so need the money I have to plow into it so we don't have to live in a building site for any longer than we have to. I also don't want to become the "controlling partner" and scrutinise everything she spends on after I've lent her some money. I am incredibly supportive, and will help her as I can, but financially I'm trying to keep everything separate. Hmmm, not sure if this makes me come off as a bad guy now?!

We have also looked at guarantor loans, but the interest on these is just as high as her cards so we wouldn't gain anything from them.

vanillarice

katie4 wrote: »

you'll find most people will tell you to avoid consolidation loans at all costs!
However I could not get any credit anywhere for 0% or loans i went to my local credit union and they have approved me for a loan no questions asked (i have been with them for a good number of years now though)


my interest has been greatly reduced and monthly payments more than halved which is a god send to me.


If you do get a loan to pay off the cards you have to make sure she 100% cancels the cards straight away to prevent any temptaion from racking them up again.


good luck!

Thanks Katie,

We have briefly looked into credit unions, though not too deeply because our initial research seemed to hint that the loans they offer are of relatively low value and wouldn't cover the cost of this debt, so we pushed them to the side.

She is now on top of things, and even said herself if the loan comes through the cards will be gone, though she may apply for a new low limit one to use as a monthly spend and full repayment to start rebuilding her credit score.

Ebe_Scrooge

vanillarice wrote: »

We have also looked at guarantor loans, but the interest on these is just as high as her cards so we wouldn't gain anything from them.

Just to your last point there - I would strongly advise against a guarantor loan. As you've discovered, the interest rates are ridiculous, and ultimately if she were to default on the repayments then you'd be left holding the baby. If it comes to that, then you're much better off to just take out a loan in your own name and give the money to her ( and let her pay you back if you so wish, or else just look on it as a gift ). Assuming you have a decent credit history, you'll be able to get a far lower rate of interest.


This does, of course, raise the perennial issue of "what if she doesn't pay you back". The bottom line is, realistically there's not a fat lot you could do about it. But then again, if you're living as a couple, it may be that you could view it as a joint debt, so to speak, with no expectation of her paying you back. Obviously that's your decision - but I just thought I'd put the option out there for you to consider.

vanillarice

Ebe_Scrooge wrote: »

Just to your last point there - I would strongly advise against a guarantor loan. As you've discovered, the interest rates are ridiculous, and ultimately if she were to default on the repayments then you'd be left holding the baby. If it comes to that, then you're much better off to just take out a loan in your own name and give the money to her ( and let her pay you back if you so wish, or else just look on it as a gift ). Assuming you have a decent credit history, you'll be able to get a far lower rate of interest.


This does, of course, raise the perennial issue of "what if she doesn't pay you back". The bottom line is, realistically there's not a fat lot you could do about it. But then again, if you're living as a couple, it may be that you could view it as a joint debt, so to speak, with no expectation of her paying you back. Obviously that's your decision - but I just thought I'd put the option out there for you to consider.

Thanks!

Yes, guarantor loans are now pretty much bottom of the list.

Me getting a loan would be a possibility, but I am due to remortgage the house later this year so need to keep my credit file as clear as possible until then, but this would mean another 8 months of her wasting money into these credit cards,

Repayments won't be an issue, she could happily pay me the repayment amount as I discussed above.

indesisiv

vanillarice wrote: »

Thanks!

Yes, guarantor loans are now pretty much bottom of the list.

Me getting a loan would be a possibility, but I am due to remortgage the house later this year so need to keep my credit file as clear as possible until then, but this would mean another 8 months of her wasting money into these credit cards,

Repayments won't be an issue, she could happily pay me the repayment amount as I discussed above.

Just as long as you take it as if she doesn't pay you, then you will have to pay it.
My last debt that I am paying off (nearly gone) is because of something just like this.

vanillarice

indesisiv wrote: »

Just as long as you take it as if she doesn't pay you, then you will have to pay it.
My last debt that I am paying off (nearly gone) is because of something just like this.

Indeed, fully understand that.

One of the reasons this is a lower option for us. Mainly because she wants to do this and clear it on her own as much as possible, she doesn't want to burden the debt onto me unless there is no other option.