Should I consolidate my interest free debt

3flyingjs

I REALLY need some advice please. I have £21,000 in debt. This is all spread over several 0% interest cards and I manage all these cards and interest free periods with the use of a comprehensive spreadsheet. I move each debt before its interest free period ends. I pay £700 a month towards this debt, spread across all the cards, and am slowly chipping away at it. However, I have 2 or 3 balances on the same card which have different interest free periods and I am not able to pay off the debt which has a later interest free period.

For example on one card, the interest free period of Debt A ends on 1 Jul 2018 and the interest free period of Debt B ends on 1 Jan 2019. Because of the way the payments are applied, everything I pay to this card goes to Debt A. Debt B isn’t touched until Debt A is paid off. So when Debt A is paid off, then I only have a few months left of the interest free period for Debt B, and Debt B is the same amount as it was when I started. I have the same situation on 3 of my cards. Even though I am paying no interest on these debts, I am starting to think that it may be better to get a debt consolidation loan and just pay a one fixed amount which will clear the whole lot. Even though I am paying a substantial amount to this debt, I can’t see an end to it, plus I am getting concerned that my options for interest free cards will soon dry up.

I put the figures into a loan calculator on my bank’s website and found that (theoretically) a loan for £21000 over 5 years would cost me £380 a month. And it would all be paid off in 5 years - less if I can continue to pay £700 a month like I am now (or £500 maybe – 700 is quite difficult.). Of course this is all assuming my bank will lend me this much money. I don’t know. Does anyone have any advice? Seems crazy to “choose” to pay interest on debt but I just need to see an end to this and it’s causing me a lot of stress. Advice gratefully received. Thank you.

DCFC79

3flyingjs wrote: »

I REALLY need some advice please. I have £21,000 in debt. This is all spread over several 0% interest cards and I manage all these cards and interest free periods with the use of a comprehensive spreadsheet. I move each debt before its interest free period ends. I pay £700 a month towards this debt, spread across all the cards, and am slowly chipping away at it. However, I have 2 or 3 balances on the same card which have different interest free periods and I am not able to pay off the debt which has a later interest free period.

For example on one card, the interest free period of Debt A ends on 1 Jul 2018 and the interest free period of Debt B ends on 1 Jan 2019. Because of the way the payments are applied, everything I pay to this card goes to Debt A. Debt B isn!!!8217;t touched until Debt A is paid off. So when Debt A is paid off, then I only have a few months left of the interest free period for Debt B, and Debt B is the same amount as it was when I started. I have the same situation on 3 of my cards. Even though I am paying no interest on these debts, I am starting to think that it may be better to get a debt consolidation loan and just pay a one fixed amount which will clear the whole lot. Even though I am paying a substantial amount to this debt, I can!!!8217;t see an end to it, plus I am getting concerned that my options for interest free cards will soon dry up.

I put the figures into a loan calculator on my bank!!!8217;s website and found that (theoretically) a loan for £21000 over 5 years would cost me £380 a month. And it would all be paid off in 5 years - less if I can continue to pay £700 a month like I am now (or £500 maybe !!!8211; 700 is quite difficult.). Of course this is all assuming my bank will lend me this much money. I don!!!8217;t know. Does anyone have any advice? Seems crazy to !!!8220;choose!!!8221; to pay interest on debt but I just need to see an end to this and it!!!8217;s causing me a lot of stress. Advice gratefully received. Thank you.

Consolidation is frowned upon in these parts and Ill outline some of the reasons:

You need to not run up more debt.
Sort out the reasons for the debt so they don't reoccur
Not much point in consolidating if you don't look at your finances and cut back

Post up an SOA and others will give advice where to cut back.
Whats the reasons for the debt ?

It all depends whether the bank would loan the £21k, as far as lenders are concerned your wanting to increase your debt to £42k.

January2015

Why / how did you end up with £21k on credit cards? I'm not preaching - I was far worse than that. The point is until you realise why you are racking up debt and look to cut back you will just keep increasing the debt.

Consolidation is the worst thing you can do in my opinion. You move interest free debt to interest bearing debt (bad thing ) and then you have empty credit cards and/or new interest free card offers and off you go again building even more debt. This is exactly what happened to me. I consolidated more than once..... huge mistake

sourcrates

3flyingjs wrote: »

Of course this is all assuming my bank will lend me this much money. I dont know. Does anyone have any advice?

Your bank is unlikely to offer you a loan of £21,000 as others have pointed out, you already owe that amount on credit cards, they will see it as doubling of your debt, of course we do not know your salary, or your other outgoings, but common sense would say its a no no.

Consolidation is just one of the many stages of debt people tend to go through, then when all your other options are finally exhausted, they do what they should of done in the first place, and get debt and budgeting advice..........so why waste time and effort, post your SOA and we will see where savings could be made, so you can pay this debt off quicker, without the need to borrow further.

3flyingjs

I'm not at all worried at all that I will dip into these cards if they are empty. I have a very strict budget and I live well within my means, hence being able to pay £700 a month towards debt. The biggest chunk of this £21k is a £15k loan from a friend to pay for some home renovations. It's a long story but he called the loan in as he had some serious health issues and needed the money asap. I just had to give it him so I used money transfers from 0% cards to pay him. I haven't "spent" on credit cards for years. The only ones I have are purely for 0% purposes. The other 7k has come from unexpected big payouts (new boiler being one of them!). I've had the £7k debt for a long time because for ages, I was only paying the minimum payment when I wasn't earning a lot of money. I am earning a lot more now. I AM concerned that big issues might come up that require a chunk of money but I can't afford to save for unexpected things while I am paying £700 a month towards debt. It's chicken and egg!

I get that consolidation sounds risky for many, but I am not worried that I will fall into a debt spiral if I have empty cards. All I care about is paying this damn thing down. I just can't see how I can make a dent in it with the way the payments are applied. Does anyone have any other advice about that?? I could make even more savings and pay £1000 towards it but that still won't make much a difference to it! Does that make sense?

redpete

£700 will take around 2.4 yrs to pay off
£500 (which you seem to be considering) would take an extra year.
£1000 would cut it by 9 months.
...far from not making much difference.

This doesn't take into account interest and I think you will run out of 0% offers rather than 'might'.

3flyingjs

OK I don't think I am being very clear on what the issue is.

If it was a case of £700 a month coming off the entire 21k, then that wouldn't be a problem and yes would be paid off in 2.4 years. But it doesn't work like that with the way the payments are applied to each debt on each card. Every month I pay £200 off Card A, £300 off Card B and £200 off Card C = £700. Card A has Debt A and Debt B. The £200 only goes to pay Debt A and Debt B remains the same. Card B has debts A B and C! All with different 0% periods. Debt B on Card A is the biggest, but as I am only paying £200 off Debt A, debt B will remain the biggest until Debt A is paid off. I won't even get to debt B for 4 more months. I can't increase what I pay on Debt A because I need to be paying Cards B and C. I guess it's hard to understand if you're not familiar with how all the different debts on different interest free periods work. I wish it was as simple as £700 (or £1000) chipping away at the full 21k.

Sea_Shell

I must be missing something here...

If the whole £21k is at 0%, how is your £700 not coming off the total debt??

Surely if no interest is applied, then next month you'll only owe £20,300, and so on.

Sea_Shell

Are you spending on them and accruing interest paying debt too?

Pixie5740

Are you only making the minimum payments to cards B and C?

3flyingjs

No I am not spending or increasing the debt. Technically yes the amount of debt is decreasing every month, but the length of time it will take me to pay the debt off is NOT decreasing, in fact it feels like it is increasing, because the debts with the longest interest free period are not being touched. So the full debt of debts B and C (on 2 cards), just sit there while I am chipping away at debt A. When I pay debt A off, I then start on B but the interest fee period on B has now decreased by several months (and nothing has been paid off it), so I end up having to move it to a longer interest free period..And I end up being in debt for longer..even though I am not paying any interest on the debt. It is very very frustrating.

I am paying more than the minimum of cards B and C. But actually it might better just throw everything that I have at debts A on each card to pay them off first, and just pay the minimum on the others, and then concentrate on the next one!!!8230;Sorry guys I know this is confusing!