Starting my mission to become debt free - Snowballing advice

Hoorah

Consolidation... Keeping the cards...impulse spender... Theres going to be tears here and youll end up racking uo the cards again AND having the consolidation loan on top. Just prove me wrong and cancel ALL the cards. Its like a gambling addict keeping his betting accounts open. 

BabyStepper

Just wanted to say well done for paying off £7,036 in 5 months. Even with your £2k cash drop I'm not sure how you did that with just over £200 per month to overpay and such high interest rates for most of those months, commission maybe? However you managed it, bravo!!

ryanm8655

Just wanted to say stick around and be very careful now that you’ve consolidated. People aren’t being Debbie downers when they say this and it’s a lesson I had to learn the hard way.

If you look at my post history you’ll notice I was here in around 2015 (IIRC). Basically suggesting consolidation, getting told it was a bad idea but thinking I knew best. Mathematically it made sense to reduce my interest payments...so I ignored the warnings.

Fast forward to last year and I’m back with more than double the debt, even though my income had increased at around the time I consolidated. I see a lot of parallels with your situation, I thought my problem were solved by a boost in income and reducing the debt repayments but I didn’t chop up the cards...

Lesson learned this time around and I’ve been cancelling the cards as I go.

Please learn from my mistakes. I ended up with about £30k of debt at my peak, was having to withdraw cash on credit cards to pay rent after the bank significantly reduced my overdraft on payday, leaving me in the lurch. Even after that my true lightbulb moment took over a year to arrive. Took some extreme measures to get me back to debt free for the first time in my life and I wouldn’t wish it on anyone to be honest I never want to be in debt again.

So my advice...cut up and cancel all the cleared cards and have a plan to clear the debts. Don’t rely on increasing income, if that happens then great, you’ll be debt free sooner.

Also what on earth are you doing spending so
much on hellofresh when you’re massively in debt? It’s things like that that are lessons you won’t learn by consolidating. And if you don’t learn then you won’t until you absolutely have to make cutbacks as no one will lend to you anymore.

This isn’t some holier than thou post either, this is ultimately what prompted my lightbulb moment, the credit was running out and my 0% offers started ending. This put up
the payments to debt significantly, which meant I had to start thinking about what I spent. I wish I’d listened all those years ago in many ways, though it was an important lesson to learn.

greensalad

Consolidation is generally frowned upon here, for very reasonable reasons. However consolidation did basically save me, and now I'm very close to my DFD, so I am always cautious about recommending it but do also want to say it CAN work if you use it correctly.

The first step to becoming debt-free IMO is understanding why you got into debt in the first place. If you can't identify that then you're not ready for something like consolidation.

The second step is changing your mindset with money. I am personally a strong strong budgeter now and I cannot even fathom not having a strict budget. I don't understand how people (or I, in a previous time period) didn't budget. I can tell you exactly down to the penny how much I spend on everything and how much I need for any upcoming bill in the future. I even set aside £1.25 a month to pay my car tax! That is how granular my budget is. I couldn't have got to where I am now without doing that.

So my advice would be, if you're going to go the consolidation route, you need to strictly budget because if you don't know how much you can spend on X each month, that's when it starts going back on the credit card.

Of course another way to stop it is to cut up your credit cards. If you're holding onto them still, you weren't ready for a consolidation loan IMO. I'm now back to the stage where I actually spend everything through CC each month for the airmiles and immediately set aside the money for it so we have enough to pay in full each month. But I've been CC free (in terms of using them) for 2 years before I felt comfortable reintroducing a CC into my life. 

I think a good rule of thumb is that if you can't bear to cut the cards up, you're not ready for a loan.

enthusiasticsaver

BabyStepper said:

Just wanted to say well done for paying off £7,036 in 5 months. Even with your £2k cash drop I'm not sure how you did that with just over £200 per month to overpay and such high interest rates for most of those months, commission maybe? However you managed it, bravo!!

I assume that the second soa applied here which was lower than £18k as the Bamboo and Likely Loans had interest front loaded so when the consolidation loan with Manchester CC paid them off the interest was lower due to settlement figures being so much lower than the current balances in the first soa. 

As said above consolidation only works if spending habits change and ideally a move away from using credit if you are an impulse spender.  You have a good salary so now your debt is under control I would tackle that Barclays overdraft in case they suddenly take it away or start charging. 

KeysMcK

Hi all,

I’m notoriously bad at keeping in touch with people, so updating on here is no different. BUT. Slight update. 

I’ve taken a slightly different approach to things. I’ve been paying down debts still but have only reduced my overall debt by about £3000 since my last update as I’ve also putting money into both mine and my partners LISA accounts so that when I DO become debt free I’m in a position to buy a house. My reasoning is that the 25% bonus outweighs the interest on my remaining debts. It’s given me a boost too, knowing that there’s a tangible reason to be doing this. A real reward at the end. 

I’ve paid off all but one credit card, and all overdrafts. I have no defaults on my account, and the last payday loan drops off my account in a few months time so once my debts are cleared I should have a pretty solid credit rating. 

Current Debt - 

- £6000 - Virgin Credit Card 0% - paying £235 per month - You might notice this has gone up. We basically needed to pay for the car to be fixed, our money was locked in LISAs so I paid on a credit card and transferred it to the 0% card. 

- £3500 - MCU loan - 12% with 18 months left - £215 per month

- £285 - PayPal Credit - 0% (New debt. Washing machine failed miserable) 

Savings - 

I also now have £8,000 in my LISA, and I’ve put a further £2,225 in my partners. She also put £4000 in her own last year so we’re sat at £14,250 (£17,812 with govt bonus). 

SOA

Secured & HP Debts

Hire Purchase (HP) debt ...... 0.....0......

Total secured & HP debts...... 0......-.........- 

Description....................Debt......Monthly...APR

Manchester credit .............3500......215.......12

Virgin money CC................6000......65........0

SSL............................744......10........0 (I’ve had this company agree to remove the defaults from my file, and remove interest completely as the debt originated from a Sunny loan.

PayPal credit...................285.......14.........0

Barclay card...................0.......0.........23

Past due credit ...............0........0.......0

Active security ...............0.......0........0

Barclays Overdraft .............0......0.......0 (CANCELLED

Monzo Overdraft .............0......0.......39 CANCELLED

Total unsecured debts..........10,529.....280.......

So yes, the past 12ish month have only seen my debt decrease by £3k, but it that’s still a massive drop in debt from my first SOA in July 2020 which was £21,192 total debt, and even more impressively I’ve gone from net assets of -£21,192 to -£279 (or +£2283 inc govt bonus). 

I feel like I’m in a very positive place. A long way to go yet, but this feels good. 

NeverendingDMP

Well done on the progress so far.
I just wondered whether you would consider paying your Isa money into an emergency fund for a few months so you dont have to use credit in an emergency. I understand the maths is better for you this way but having the emergency fund that you can access is really beneficial as well, especially if you are looking at home ownership.

KeysMcK

NeverendingDMP said:

Well done on the progress so far.
I just wondered whether you would consider paying your Isa money into an emergency fund for a few months so you dont have to use credit in an emergency. I understand the maths is better for you this way but having the emergency fund that you can access is really beneficial as well, especially if you are looking at home ownership.

Thanks! Luckily it only cost 1% last time, but would be 4% in future which could be a real hit. 

Yeah this is something I’ve been thinking since the last ‘blip’, putting the money into a savings account April-April and only transferring into the ISA before the deadline. The only thing that’s making us think twice is that the fact we CAN’T withdraw from the ISA has really helped us think as if we don’t have that money. 

I have been thinking of snowballing, paying the minimum on the credit card and clearing the loan, but again I’m not sure I trust myself to then plow all the payments into the credit card once the loans paid off. 

flipflopflo

Why not open a Credit Union savings account since you already have a relationship with them. You can put your emergency fund money in there and it’ll be available to you pretty quickly but as it’s not as visible as a building society or bank savings account it is easier to save into. 

KeysMcK

flipflopflo said:

Why not open a Credit Union savings account since you already have a relationship with them. You can put your emergency fund money in there and it’ll be available to you pretty quickly but as it’s not as visible as a building society or bank savings account it is easier to save into. 

Yeah I have one attached to the loan account but I find it a nightmare to access in a pinch.

I’ve opted for a Moneybox cash savings account along side my LISA. So far so good!