Plan to clear £34k debt mountain

jls85

Thanks @IrishSean. I'll definitely look into that, although I don't have any credit card debt, just 3 x loans at 15%, 9% and 6.9%. So my thinking was I could transfer the remainder of the 15% loan (£5.5k) and a chunk from the 9% loan onto this cheaper loan and be paying less interest overall. 

Is that a bad plan? Would I be better looking into finding a BT option if I can get it? Is it even possible to get a BT to pay back a loan? Sorry for all the questions!

jls85

It's ok, I've just done a bit of digging and have discovered that I would need a money transfer card to do that. I should have Googled before I bothered you, sorry! Unfortunately, despite being pre-approved for three different BT cards, I'm not eligible for any MT cards (even though three of them are with Virgin Money). So it doesn't look like that is an option for me.

IrishSean

Virgin offer MT as well as BT (in most cases). Sry I forgot to check whether your debt was loans or CC. 

MT might be an option but the length of payment aren't as good as BT. As a result I would think consolidating existing might be an option, although even though %% apr is less as ML said in this weeks e-mail you need to factor in redemption costs to see if it's really cheaper. My reckoning is it would be but run the numbers. 

Also check whether you can over pay on a new loan; lastly be careful about boxes such as 'will your income drop in the next 3 years'. If you've any idea it will then find payments difficult it could cause problems later (altho everything is subjective & looked at on a case by case, plus it would be up to your bank to cross -ref your drop in income, should it happen, with your loan). 

Lastly i'd be super disciplined to pay off loans in full if taking the new £12k so as not to add to the debt mountain (obvs) even if it does slightly reduce your monthly commitment (want to avoid adding more debt to future you & all that👍).

jls85

Thanks again Sean. I did as you suggested and checked all of my paperwork for additional charges and there were some (58 days interest) but based on the interest I'd be saving over the long term, it would definitely work out cheaper. I would also be able to overpay on the new loan so I decided to go for it... and got told right at the last minute that they couldn't offer me the APR in the letter any more and upped it to 11.7% - aaargh! That's another search on my credit file for nothing!

The snowball calculator said that with this new loan rate, I'd pay back the overall debt in 26 months rather than 27 months but I'd pay £200 more in interest in the long run. So it doesn't make sense to do it. I'm a bit gutted but you live and learn I guess. I'll just stick with what I have and keep chipping away at it as per the original plan.

IrishSean

!!!!!!, that's a pain in the proverbial.

Like a lot of things about personal finance i'm sure there are people clever enough to close the gap between soft and hard searches so rates aren't as badly skewed as that; it almost feels like entrapment at those rates. 

It's worse given the fact your bank wrote to you (as opposed to a website banner ad or a leaflet / maildrop from them).

 It just seems very unfair you had to 'use up' a hard search like that.

jls85

That’s exactly what it feels like! I have contacted the bank to ask why it happened, as like you say, they contacted me. But I’m not holding out much hope they’ll do anything about it tbh.

On reflection, it’s not the worst news in the world either. Yes I have a high amount of debt but my credit record is really good according to the MSE money club. I’ve not applied for new credit in a while and won’t be again either, so hopefully this won’t have a huge impact 🤞🏼 

In better news, another £20 made from matched bets yesterday to add to the pot.

jls85

I’ve had a bit of a bad couple of days to be honest. On the plus side I made £27 from more matched bets yesterday, but on the other hand I’m creeping back towards that feeling that I still have such a long way to go that these small wins won’t make much difference. 

Logically I know that’s not true, but I think looking back I’ve never been very good at ‘little and often’. I’m quite goal orientated, which can be a good thing but also a negative. And that’s partly what’s got me to the situation I am in. I wanted to go to uni to do a postgrad degree so I took out a loan; I needed to do up my house after I moved in so I took out a loan etc. I guess part of the journey is understanding my behaviour and finding ways to overcome it. At the moment I’ve realised that I feel super motivated on payday when I can transfer a big chunk of money over to my debts, then as the month goes on I start to feel really demotivated as I can only add £20 here and there.

How do other people stay motivated between paydays when doing this? 

To clarify,  when I say demotivated I don’t mean I’m going out and spending the extra money I’ve saved or anything. I just mean that the task starts to feel so big that I feel really sad and down about it.  

IrishSean

I feel like that at the end of the journey! 
I think look back at your achievements, even just in mindset. Have hobbies or income gen ideas (comping, selling online etc.) To pass the slow weeks. 

enthusiasticsaver

I have only just caught up on your diary and saw your question about taking up a new loan at a lower rate and was about to tell you not to do it as invariably few people are offered the headline rate. As you found out once they hard search the rate usually is a lot higher. Still onwards and downwards hopefully. 

I know this is a slog but honestly this is something which will take you a while to pay off so keeping motivated can be difficult. I think for you it may be harder because although your debt is quite high you have 3 fairly high debts rather than some small credit cards you can pay off quickly. I think for you just thinking about the big numbers is what is getting you down so just keep pushing to get into the next £1k or £10k bracket as you pay the loans down. The small amounts do make a difference but it takes time. Only when looking back in a few months time will you see what a good job you are doing. You are almost below £30k and I always think the £20k bracket sounds a lot better. 

Scloud

I found it really helpful to focus on 1% of a debt at a time. Each tiny prolific payment or unexpected money helps pay the next 1%. It can make my very large debt feel achievable and helps when I feel the mountain is too high. That said, the middle of the month when payday feels so far is really hard. I tend to obsess over my spreadsheets a little more and am trying to step away from money during that time... easier said than done!