Struggling with debt? Ask a stepchange debt adviser a question

rocktron_amp

Hello

What do you think of using a personal loan to pay off credit card debt?

I think personal loan can be secured against our home. It has a interest rate 5 - 7%

Could this be  considered a partial Avalance strategy?

Say a personal loan £15 - £20K pays off the credit card total of double that.

I would hope that reduces the compound interest rates on the cards standard APR considering.

My only concern here, what does using as Personal Loan do my overall credit score rating. Does it improve  according to the credit card providers? I would hope the providers would then issue me with the better 0% balance transfer cards, because they see that I have paid down substantially what I debt,  which would allow me to chop down the debt even faster.

Good idea, bad idea?

Thoughts?

Subject to me maintaining my employment and income over the next years and years.

 

fatbelly

Anything secured against your home is a secured loan. This is high priority debt.

It is OK to use low priority debt to pay high priority debt but not the other way around

With credit card debt, what you could consider is 0% balance transfers

https://www.moneysavingexpert.com/credit-cards/balance-transfer-credit-cards/

If these are not available because of poor credit history, you need to chat to Stepchange about a strategy.

Apologies for butting in but I felt it needed a quick comment.

rocktron_amp

fatbelly said:

Anything secured against your home is a secured loan. This is high priority debt.

It is OK to use low priority debt to pay high priority debt but not the other way around

With credit card debt, what you could consider is 0% balance transfers

https://www.moneysavingexpert.com/credit-cards/balance-transfer-credit-cards/

If these are not available because of poor credit history, you need to chat to Stepchange about a strategy.

Apologies for butting in but I felt it needed a quick comment.

Thank you getting back to me @fatbelly and the clarity of the secured. Thanks for butting in.

If I could get a personal loan WITHOUT the security against my home, it could be cool then.

I see enviously 32 month balance transfer card on the MSE Eligibility, the site says that I am inelligible for it. Shucks!

I was only thinking of the personal loan as an alternative to equity release, which when I read, comes with drawbacks that I don't like. Such as lifetime mortgage. Yuck.

It's look like a snowball strategy is the one to do it.

BuzzyBees101

Hi,

It would be great if you could give me some advice.

I have completed my budget on the Step Change website and it said that on a DMP I would pay £64 over 28.5 years. That’s a long time but I was hoping to pay more if I could and I will be getting some pay rises over that time to contribute more and get rid of these debts. So I’m guessing Step Change will set up an arrangement to pay with the creditors and divide this between them. However, from what I’ve read would it be better to wait and not pay until defaults are issued because with an arrangement to pay they don’t fall off your credit file until they’re payed? By looking at the possible amount of time it may take me to pay them it may be a while! Is it right that after a default is issued this only takes 6 years to fall off your credit file? This is why I’m thinking it would be better. Or would Step Change be able to help with arrangements to pay with the smaller debts and default on the larger debt £14,500.

I don’t know if I’ve got that info right or what to do or if this is something that Step Change could do in a DMP. I just want to get the debts paid and not have my credit file impacted for longer than needed. Would like the option to get a mortgage in the future if I could and I'm not getting any younger!

Any help would be greatly appreciated

BuzzyBees101

Hi,

Sorry I’ve posted this on like page 6 by accident so posting here instead.

It would be great if you could give me some advice.

I have completed my budget on the Step Change website and it said that on a DMP I would pay £64 over 28.5 years. That’s a long time but I was hoping to pay more if I could and I will be getting some pay rises over that time to contribute more and get rid of these debts. So I’m guessing Step Change will set up an arrangement to pay with the creditors and divide this between them. However, from what I’ve read would it be better to wait and not pay until defaults are issued because with an arrangement to pay they don’t fall off your credit file until they’re payed? By looking at the possible amount of time it may take me to pay them it may be a while! Is it right that after a default is issued this only takes 6 years to fall off your credit file? This is why I’m thinking it would be better. Or would Step Change be able to help with arrangements to pay with the smaller debts and default on the larger debt £14,500.

I don’t know if I’ve got that info right or what to do or if this is something that Step Change could do in a DMP. I just want to get the debts paid and not have my credit file impacted for longer than needed. Would like the option to get a mortgage in the future if I could and I'm not getting any younger!

Any help would be greatly appreciated 

saving_88

I would let them default first. I wish I found this forum before i took my plan out. I went for the plan due to reading wrong reports of bailiffs etc. My debts were all unsecured But paid on a DMP straight away. If your going to take a long time to pay debts off then your credit file is going to be ruined anyway. Defaulting quicker helps this recover. quicker. Im on a DMP and all creditors bar one have defaulted. If i let them all default it would have been better for me. 
I aim to now wait 6 years, they disappear of file and unethical it is. But not pay them after or pay minimum payments and save for myself. 

So start the plan after defaults. 

StepChange_Aidan

rocktron_amp said:

Hello

What do you think of using a personal loan to pay off credit card debt?

I think personal loan can be secured against our home. It has a interest rate 5 - 7%

Could this be  considered a partial Avalance strategy?

Say a personal loan £15 - £20K pays off the credit card total of double that.

I would hope that reduces the compound interest rates on the cards standard APR considering.

My only concern here, what does using as Personal Loan do my overall credit score rating. Does it improve  according to the credit card providers? I would hope the providers would then issue me with the better 0% balance transfer cards, because they see that I have paid down substantially what I debt,  which would allow me to chop down the debt even faster.

Good idea, bad idea?

Thoughts?

Subject to me maintaining my employment and income over the next years and years.

 

rocktron_amp said:

fatbelly said:

Anything secured against your home is a secured loan. This is high priority debt.

It is OK to use low priority debt to pay high priority debt but not the other way around

With credit card debt, what you could consider is 0% balance transfers

https://www.moneysavingexpert.com/credit-cards/balance-transfer-credit-cards/

If these are not available because of poor credit history, you need to chat to Stepchange about a strategy.

Apologies for butting in but I felt it needed a quick comment.

Thank you getting back to me @fatbelly and the clarity of the secured. Thanks for butting in.

If I could get a personal loan WITHOUT the security against my home, it could be cool then.

I see enviously 32 month balance transfer card on the MSE Eligibility, the site says that I am inelligible for it. Shucks!

I was only thinking of the personal loan as an alternative to equity release, which when I read, comes with drawbacks that I don't like. Such as lifetime mortgage. Yuck.

It's look like a snowball strategy is the one to do it.

Hi,

Thanks for your posts.

Taking out a loan shouldn’t affect your credit score if you can keep up with the payments, however I don’t recommend taking out further credit to pay existing unsecured debts, particularly a secured loan which could put your home at risk if you had difficulty repaying it in the future.

If you can afford the contractual payments to your existing credit cards, I’d usually suggest aiming to pay more towards the ones with highest interest to clear them faster. But if you feel you may struggle to do that, it may be better to look at debt solutions like a Debt Management Plan.

If you’d like to review your options with StepChange you can use our online tool or give us a call to speak with an advisor.

I hope this helps.

Aidan

StepChange_Aidan

BuzzyBees101 said:

Hi,

Sorry I’ve posted this on like page 6 by accident so posting here instead.

It would be great if you could give me some advice.

I have completed my budget on the Step Change website and it said that on a DMP I would pay £64 over 28.5 years. That’s a long time but I was hoping to pay more if I could and I will be getting some pay rises over that time to contribute more and get rid of these debts. So I’m guessing Step Change will set up an arrangement to pay with the creditors and divide this between them. However, from what I’ve read would it be better to wait and not pay until defaults are issued because with an arrangement to pay they don’t fall off your credit file until they’re payed? By looking at the possible amount of time it may take me to pay them it may be a while! Is it right that after a default is issued this only takes 6 years to fall off your credit file? This is why I’m thinking it would be better. Or would Step Change be able to help with arrangements to pay with the smaller debts and default on the larger debt £14,500.

I don’t know if I’ve got that info right or what to do or if this is something that Step Change could do in a DMP. I just want to get the debts paid and not have my credit file impacted for longer than needed. Would like the option to get a mortgage in the future if I could and I'm not getting any younger!

Any help would be greatly appreciated 

Hi,

The website will give you an estimated term for the Debt Management Plan (DMP) based on the amount that you can currently afford to offer to the creditors. A DMP is flexible, so as your income increases, you’ll be able to pay more to repay the debts sooner.

Most debts fall off your credit file six years from the default date. Creditors will usually default your account after a few months of reduced payments in a DMP, but they don’t have to do this. Some people prefer to wait until all the debts have defaulted before starting a DMP to make sure that they’re gone from their credit file after six years.

In a DMP, each creditor receives a share of your monthly payment on a ‘pro-rata’ basis. We wouldn’t be able to offer a plan where you’re paying some debts and keeping others on hold until they default.

There’s some more information on how DMP payments are worked out here.

Regards,

Aidan

GreenGiant87

Hello

I have been on a DMP with several creditors since 2016, they all defaulted that year and I used step change who pretty much saved my life.  

Without going into it I was stuck on a family mortgage where the other party contributed nothing.  We have now exited that arrangement and I have a sum of money.  I could clear the entire debt, but I need to use that money to buy an onward property.  I have a figure in mind which would be 60% - 70% of the total amount and allow me to pursue a mortgage in the 18 months.

How would it be best to manage this situation?  All but one of the debts are with debt collectors and they have all offered discounts in the past of around 40% which would work for me. Will step change handle this?

Sorry if this is the wrong place, any support would be appreciated.

Thank you

StepChange_Aidan

GreenGiant87 said:

Hello

I have been on a DMP with several creditors since 2016, they all defaulted that year and I used step change who pretty much saved my life.  

Without going into it I was stuck on a family mortgage where the other party contributed nothing.  We have now exited that arrangement and I have a sum of money.  I could clear the entire debt, but I need to use that money to buy an onward property.  I have a figure in mind which would be 60% - 70% of the total amount and allow me to pursue a mortgage in the 18 months.

How would it be best to manage this situation?  All but one of the debts are with debt collectors and they have all offered discounts in the past of around 40% which would work for me. Will step change handle this?

Sorry if this is the wrong place, any support would be appreciated.

Thank you

Hi,

Thanks for your post. I’m glad to hear that your DMP has helped you.

We have a specialist Settlements team that may be able to help you to make partial settlement offers to your creditors. I’d recommend getting in touch with our Review team, as they will be able to check your budget and talk you through your options.

There’s some more information about our Settlements service here.

Regards,

Aidan