Grasping that nettle!

GSDMum

Just sharing my experience, cos I'm that happy, and it's mainly because of the good advice I've received here 

January 2018, I decided enough was enough, and I just had to face up on our debts. It was excruciatingly painful, and extremely scary not knowing where we stood financially.

After downloading GnuCash software (free), I started learning the basics of the program, and started to record every penny we spent.

Our debts were (1st January 2018):

• MBNA credit card (available £14k) of which we owed £11,700, interest was crippling at 29.9%, monthly interest charge around £270.

• RBS credit card (available £12k) of which we owed £9,200, interest was 17.9%, monthly interest charge around £130

• Total debt was £21,500k  

After trying hard to reduce the debt; by the end of December 2018, we'd paid a staggering £4,200 in interest, and yet we still owed MBNA £9,200, RBS £9,700. We'd only managed to pay £2,600 off our total debt!

In the Spring of 2019, I contacted MBNA, basically saying we'd been a good customer for about 20 odd years, we'd never missed a beat with payment, and could they possibly do anything for us? Answer was NO! Oh well, there was no harm in trying!

It was sensible for us to wilfully tackle MBNA first. We do have a NatWest Current Account which we kept 'in the black' with an available £5k overdraft. Cost of going into the overdraft was a £6 monthly fee, and something like a 6.5% interest rate.

We totally stopped using the MBNA card, and in May we paid a £3,000 lump sum off the MBNA balance, using the overdraft. By July we'd now reduced MBNA balance to £2,200 (now paying £62 in interest)! This must have triggered an alert or something with MBNA as they offered us a loan of £10k @ 3.4% interest over 36 months 

The £10k was used to pay off the RBS card. At that point we arranged with RBS for them to collect the full balance at the end of every month, to avoid paying any interest. (All our shopping now goes through RBS.) 

We continued paying off MBNA getting the balance under £10k, and ridding us of the 29.9% interest rate! Then we worked on paying back the overdraft (which did rise at one point to £4,900). Ridding us of this debt was helped hugely by yet another offer of a loan from MBNA, this time for £4k, @ 0% interest for 18 months.

Our present debt is now down to having one debt owing to MBNA for £13,400, and the interest charge this month was a lowly £34 

We're aiming to knock the MBNA debt down, by continuing our budget drive, getting it under £4k by the end of the year, so we start 2021 not having to pay any interest.

Interest paid to date:

• 2018 - £4,136

• 2019 - £2,918

• 2020 - £300 (budgeted)

We're not 'there' yet... but it does feel good to have at least a 'fighting' chance 

Anyone feeling a little apprehensive about getting a handle on their debt... do it now! Painful at first, but so worth going through that barrier!

GSDMum

Just want to add... it's complicated ... but registering for a new 0% was not an option due to life style choice and not credit score related )

Unicorn_cottage

What do you mean life style choice? Can you do any bits and bobs like switching bank accounts to get the cash incentives? 

GSDMum

Unicorn_cottage said:

What do you mean life style choice? Can you do any bits and bobs like switching bank accounts to get the cash incentives? 

My husband and I retired to the Inland Waterways aboard our narrowboat. We're 'continuous cruisers' discovering the 3000 miles of the system. https://canalrivertrust.org.uk/enjoy-the-waterways/boating/buy-your-boat-licence/continuous-cruising
It sounds horrible, but we're classed as 'no fixed abode' and wouldn't qualify T&Cs   Credit card postal address is through my sister. The cards were taken out when we lived in a house. All is above board literally 

sourcrates

Well done, that`s one way to do things, and its worked, so far, for you, but consolidation of debts is not the right choice for everyone, they must have been pretty desperate to keep you as a customer, offering an interest free loan to you, banks don`t like losing long term customers that retain a debt balance, after all, that`s how they make their money.

Credit card companies are very bad at offering debt advice, usually you have  to be behind on your payments in order to get any help at all, and then all they offer is a six month interest freeze, at the most, which results in AP markers, so if your struggling, it really is, as daft as it sounds, better to default and arrange a DMP or other solution, than to ask the card company for help.

In your case, all you have done is move the debt elsewhere, you may have saved money, you may not, you certainly lowered your payments and reduced the amount of monthly interest you were paying, and the interest free loan certainly helped you in that respect, but not everyone can get such good deals unfortunately, and can end up in a lot worse place than they where.

GSDMum

In your case, all you have done is move the debt elsewhere, you may have saved money, you may not, you certainly lowered your payments and reduced the amount of monthly interest you were paying, and the interest free loan certainly helped you in that respect, but not everyone can get such good deals unfortunately, and can end up in a lot worse place than they where.

Yes, I quite understand moving debt around can be a bad idea. It does take discipline and an unwavering commitment to get rid of the debt once and for all. I so want to get rid of this debt, it's now become a 'game'.
I did think after my call to MBNA, and their subsequent offers of cheaper loans after we looked to be closing the account, is obviously all part of a marketing plan. 
When you need money finance companies won't lend, but it appears if they see you coping and discharging the debt, fishhooks start hurtling you way 
Be aware!

monetxchange

Fellow boater here! A few things to note - make sure you have a HUGE emergency fund saved. Things can and will go wrong on boats with terrifying frequency. You then have to pay through the nose to get a boat specialist who’s willing to come out. It’s not as straight forward or as cheap as home repairs. Budget for the absolute worst. And this is coming from someone permanently moored and bought a modern done up boat and not a fixer upper - still cost me thousands every year! 

Make sure you put aside more for the more expensive winter. Coal and logs for the stove and using more gas bottles really adds up, especially if you’re cruising without a car and have to pay premium chandlery prices instead of cheap supermarket coal etc.

Also keep an eye on where you are with your continuous cruising. The CRT are vague on how far they expect you to move etc and you don’t want to get hit with fines.

GSDMum

Thanks Monetxchange. Good tips there 
You're not kidding about things that can go expensively wrong quickly on a boat. As our boat had it's bottom blacked last June, and we updated our 3 solar panels at the same time, I'm hoping there's not too much to spend this year. We will need a new bank of batteries before next winter (around £150 x 4). I've budgeted £100 a month this year for boat maintenance, so fingers crossed..... 
Smokeless fuel (£12.50 for 25kg bag - a bag lasts 3 or 4 days), diesel (domestic charge £0.94 per litre) and gas for cooking (£35 a bottle that lasts approx 65 days) we get from a fuel boat. Budget for this is £150 a month, obviously it's higher in the months we've got the stove lit.
These days I watch every penny, I'm obsessed to banishing the debt.   

db2016

good luck with it all, and the boating. will follow,

its generally never advised overdrafts used for debt though, as they can (and have, from reading on here) be called in at any time for any reason with VERY short notices.

D_M_E

Keep at it - be aware, though, that most, if not all, banks are doing away with monthly overdraft fees and instead are charging an eyewatering interst rate of around 40% on overdrafts, made me tell the bank to take mine away.