Won't pay off credit cards before 0% interest period ends - what next?

Sortyourlife

Hi, 
My partner is currently trying to become debt free and a couple of years ago got a 0% credit card to consolidate other debts. At the time this was around 3.5k. Due to some mistakes (spending on it), this then led to getting another card to make no interest. Both interest free periods end next June. 

Now due to some more mistakes (money transferring from the credit card instead of talking to me about how he was struggling), there was an extra 2k on the first credit card and ridiculous interest. Theres also, for some reason, £500 on the second card where the interest free period ends in September. This led to recently applying for another card to move the amount paying interest on from the 1st onto so its all interest free again. 

In short, there's now three credit cards: 
1st: £3300 - interest free period ends June 2021
2nd: £2200 - interest free period ends June 2021 (although £500 stops being interest free in September 2020, unable to move to the 3rd card)
3rd: £2100 - interest free period ends September 2022

It will be impossible to pay off all amounts before the interest free periods end. Also due to the amount of cards now, along with the fact that he can't just keep applying for more credit cards to shift it, whats the best course of action? Original thinking is a loan to consolidate them all into one, even paying a few hundred in interest, this is probably the easiest way to keep up with the payments, and although it may take 5 years to clear, its then dealt with. However, it's looking like he won't be eligible for any loans any time soon, I'm assuming due to the fact that he's already got around 10k in credit card limits, a loan for a car (around 5k) along with a couple of other interest free purchases that will end next year. Obviously the plan with the loan would be to clear the credit cards then close the accounts, but impossible to communicate this with a lender and for the lender to believe this. Is it just a case of carrying on for the next year trying to pay as much towards them as possible and seeing if a loan is possible next year? 

He is set on being interest free and realises how stupid he's been in the past. Any advice much appreciated   

sourcrates

Hi,

First, stop spending money you don`t have on credit cards, we all make "mistakes" as you put it, but there comes a time where responcibility must take over, otherwise you will find yourself possibly posting on the bankrupcy boards in the not too distant future.

You mention consolodation, again, a very bad idea, and again, looking to borrow your way out of debt, it never works, its a very familiar pattern we see all the time on here, i`m not trying to be harsh or insensitive here, but we read posts like this all the time.

The only way out of debt is to either, budget correctly, and live within your means, no credit at all, pay off your debts by increasing income, and/or reducing your outgoings.

If that is not possible, or won`t work, then there are debt solutions laid down by Government to deal with your debts.

A statement of affairs is the first step, dependant on the results of that, we can recomend a debt solution for you.

That can be found here -

https://www.stoozing.com/soa.php

You do not get out of debt by borrowing more money, ever, it never works, because you don`t change your spending habits that got you into debt in the first place, complete the SOA, and we will take it from there.

Sortyourlife

sourcrates said:

Hi,

First, stop spending money you don`t have on credit cards, we all make "mistakes" as you put it, but there comes a time where responcibility must take over, otherwise you will find yourself possibly posting on the bankrupcy boards in the not too distant future.

You mention consolodation, again, a very bad idea, and again, looking to borrow your way out of debt, it never works, its a very familiar pattern we see all the time on here, i`m not trying to be harsh or insensitive here, but we read posts like this all the time.

The only way out of debt is to either, budget correctly, and live within your means, no credit at all, pay off your debts by increasing income, and/or reducing your outgoings.

You do not get out of debt by borrowing more money, ever, it never works, because you don`t change your spending habits that got you into debt in the first place, complete the SOA, and we will take it from there.

Thanks - no more borrowing will occur though, he just wants to find a way to extend the period of borrowing what is already borrowed without paying a ridiculous amount of interest. 

Changing habits have changed and budgets have been created, its just that there will not be a way to clear this debt in the time period until the 0% interest ends. 

Appreciate what you've said though - its just this is stuff thats already been done, responsibility has been taken, outgoings have been reduced etc etc, its just that this debt won't be cleared in time. I am confident in the fact that from now on the debt will only shrink, as long as a solution is found without paying a ridiculous amount of interest. 

Louoffofsparkle

Do not borrow your way out , it really doesn’t work. Do you and your partner live together? They need to do a SOA and work out what the money is being spent on. It’s then a matter of sticking to a budget or looking at other solutions if that is unaffordable. 

Sortyourlife

Louoffofsparkle said:

Do not borrow your way out , it really doesn’t work. Do you and your partner live together? They need to do a SOA and work out what the money is being spent on. It’s then a matter of sticking to a budget or looking at other solutions if that is unaffordable. 

Okay thanks  

sharpe106

Sortyourlife said:

Appreciate what you've said though - its just this is stuff thats already been done, responsibility has been taken, outgoings have been reduced etc etc, its just that this debt won't be cleared in time. I am confident in the fact that from now on the debt will only shrink, as long as a solution is found without paying a ridiculous amount of interest. 

That is a good start, so now the hard work begins once you have cut the fat, posting the SOA will help people advise you both on the best route forward,

trex227

Who are the cards with? I’ve found certain companies have much better offers, for example I’ve recently cleared a 0% card with MBNA and am getting good offers for balance transfer/money transfer.

Is he just paying minimums or does he have more he can throw at them?

RAS

Until we see the SOA, it's impossible to suggest ways of sorting it out.

Obviously the priority is clearing the £500 that accrues interest by September, if the card actually credits the payments to the £500, as many will take it off the 0% portion first. Find out. If it will clear that £500:
1. Live very frugally for a month or two.
2. Does he have stuff he can sell?. Like the trainers that hurt and are still in the box somewhere or the old lap-top?

Then keep plugging away at the other debt. Pay £5 per month extra on each card that's due to end in June 2021 by DD if possible. And then pile every last penny onto the card that has the highest interest rate after the free period. 

Meantime, once the car loan is half paid back, he should be able to surrender the car at no cost. Check it out/

No-one knows what the world will be like by May 2021 but it may be that he can get another 0% card by then? 

Making a rash decision now is not a good idea. 

And do post ands SOA as suggested.

ryanm8655

Post up an SOA and you’ll get more tailored advice.

Whatever you do, do not get a loan. I did this, you can search for my original post and you’ll probably find I was saying the same things you are...I ended up back again in more than double the debt. 

Without seeing your SOA, first thing to do is set all of your direct debits to just above the current minimum. I imagine you’re just paying minimums at the moment. This will help get the debt down quicker but then also help with budgeting. Then whatever cash you have spare in your budget chuck at the highest interest debt first. Once that’s cleared chuck it at the offers that end first.

Once you’ve cleared a bit you may well find more 0% offers will open up. When I first started I had about £20k of debt charging 20%+ interest. Within a few months I got a couple of £4500 0% offers, plus new offers on my existing cards as I cleared them down. Within a few months all but about £5k was interest free, which makes a huge difference as previously much of what I was paying was just going on interest. Within 6 months everything was interest free.

BabyStepper

It's already been said but I'll say it again. Do not consolidate, and especially do not move cc debt on 0% to an interest accruing loan. 

Cards 1 and 3 have good long interest free deals on them. Card 3 is obviously the last one that should get overpayments, with more than 2 years until the deal runs out. Just set the DD at a couple of quid above the minimum on 1 and 3 and let them tick over for now (as has been suggested).

You need to check the terms and conditions of card 2. Phone them up if you have to, but you need to find out what order they apply overpayments to the different deals on the card. Most, if not all (I'm not sure) cards are now obliged to apply overpayments to the highest interest deal on the card. However, this doesn't mean that they will apply overpayments to that £500 before the deal ends.  

If you want to avoid accruing interest on that £500 then I would separately save £500 in a savings account, then overpay that card on the day the deal runs out. As I said, do contact them and find out exactly how it works. If you can't save £500 by then you might need to take a hit with some interest for a few months. Without knowing how much you will have to overpay each month it's hard to know what to suggest. If it's £500, then one months' interest might be manageable. If it's £10 then I'd be looking to get a new balance transfer for the £500. 

You have said the debts won't be paid off before the deals run out. That has been true for most of us on here. It was a big day for me when I realised I had no more shuffling to do, that my plan had reached a stage where everything would be paid off before the last deal ran out. None of us can predict the future, and the stomach lurching worry of wondering if you won't be able to get another deal is not fun. However, 0% interest was the biggest thing that helped me sort the debt out, interest really eats up your money, so it's worth making sure you are taking advantage of every possible deal available.

Post an soa, we'll try to help you get it paid down faster. In the meantime, good luck with living on a budget. It gets easier! 

ThatKiss

It might help to think of it as 4 debts rather than 3:
1st: £500 expiring Sept 2020
2nd £3300 expiring June 2021
3rd £1700 expiring June 2021
4th £2100 expiring Sept 2022

Without an SOA it's difficult to know exactly where you stand, but the £500 that is interest bearing from September is the first concern. BabyStepper mentioned that the allocation of payments is to the highest interest first, I'm not 100% certain but in my experience the card companies also direct it to the earliest-expiring 0% deal first, so until that first £500 is gone, nothing will be coming off the £1700. Worth checking the "Allocation of Payments" section on the back of your card statement.

As suggested, set up direct debits for the current minimum payment +£1 for all three cards This makes it easier to set a budget now, and going forward you'll see good progress in the balances decreasing, as opposed to the diminishing payments when you pay a %age. Anything you can spare above that should go towards the £500 to reduce that as far as possible. If it's not paid off by September, then at least you'll minimise the interest due.

There's a crunch coming in June next year but the good news is that as the balances decrease, you're more likely to open up further interest free options. I'd not worry too much  about that right now, but put a mark in the calendar to review progress around March next year so you can start looking at shuffling again if necessary.