Advice on clearing credit card debts with high interest rates

GFU123

Hello. I was wondering if anyone had advice on how to clear credit card debt with high interest rates. I've been researching different ideas, but I'm still stuck.
I have debt of around £12k spread over two cards. I can afford the monthly repayments (I pay more than the minimum), but the interest rates are so high that I pay hundreds a month, but only around £30 of that goes on actually paying off the debt itself. I've tried transferring to 0% balance cards, but these card debts have had a bad effect on my credit score, so I've been rejected. Other than these credit cards, my credit record is great. Debt charities can't help me, because I can afford the repayments, and they can't do anything about the interest rates that are stopping the debt from reducing.
I've looked at getting a loan to consolidate these card debts, but because of my credit score the interest rates I am offered are quite high. The interest rate on one loan is around 12.9%, but about half the rate on the cards, so maybe I should just bite the bullet and go for this option - I am a bit wary of taking out a loan so I want to be sure it's my best option.
I feel like these debts are going to follow me around for the rest of my life because at this rate I will never be able to pay them off. I would be grateful for any suggestions or tips!

eskbanker

GFU123 said:

I have debt of around £12k spread over two cards. I can afford the monthly repayments (I pay more than the minimum), but the interest rates are so high that I pay hundreds a month, but only around £30 of that goes on actually paying off the debt itself

Are you sure?  The minimum monthly repayment on most cards typically involves 1% of the balance plus the interest so you should be paying at least £120 off the debt, plus whatever else you're exceeding the minimum by.  What are the cards, balances, rates and repayments?

The loan idea may be viable if you're confident you won't be tempted to respend on the 'cleared' cards, but if refinancing the debt doesn't fit the bill then that really only leaves two less palatable options, namely earn more and/or spend less....

[Deleted User]

Banks will run a mile at debt consolidation - they have to assume you will take the loan and spend it on whatever you like, meaning debt of cards + debt of loan, not just loan debt thus judge your rates based on that.

If you genuinely believe you can service the debt and will pay off the cards and not spend on them - don't close both of them though, a small spend each month once clear, paid off in full, will help rebuild your credit history (ignore the fictitious score) then the loan might solve it but the history on this forum of consolidation is just full of well intentioned borrowing, followed by 2x the debt

Vinknut

On £12k credit card debt, as has been mentioned you'll typically pay 1% off the balance, plus the interest (call it approx 2% if it's double the rate of the 12.9% loan), so your minimum payment is going to be about £360, of which £120 pays off the balance and £240 on interest.
Increasing the minimum payment you make to £500 (so an extra £140) would not only reduce the debt quicker, but it will avoid you going into persistent debt with the added risk of your credit card being suspended, etc.

w66m

Can you share more info like salary and expenses etc. The more info we have the more we can help - forums are really helpful and the more you share the more you get back

phillw

GFU123 said:
I've tried transferring to 0% balance cards, but these card debts have had a bad effect on my credit score, so I've been rejected.

It's not the debts themselves, because 0% balance transfer cards are specifically for people with credit card debts.
You either don't earn enough for them, or you've missed payments etc.

Arwen

To get a 0% balance card, have you signed up to the Credit tools on this site? They tell you the ones you might be eligible for, to save being declined. Also  if you are making a few applications in a short space of time, you could sound desperate and be declined. I decided that I wanted to reduce my cards (due to an excessive online shopping habit in first Lockdown), and I decided to snowball instead , using calculators such as What's the cost. I have already cleared one card using this method and working on the others. I should have my cards cleared by early 2022 by overpaying.
IMO, 0% cards are a good way if you can get them, but you must be really really disciplined not to use the cards you have cleared. Unfortunately, I wasn't when I did it last year, but I wasn't in the mindset.  So rather than apply again for ANOTHER card, decided I would just snowball, and its working for me. I am loving seeing my balances going down!

RelievedSheff

Another vote for the snowball method here. 

We have cleared a few cards so far and are well on our way to clearing the next in the next few months.

I would avoid taking on more cards or debt in your situation and just focus on paying off what you can. Find anyway to make savings in your day to day spending and put every spare pound and penny into paying off the debts quicker. The more you pay each month the quicker the balances will reduce and the less interest you will pay.

MEM62

GFU123 said:

I have debt of around £12k spread over two cards.

Ouch!  Do you have an understanding as to how you got into this position?  It may not help you clear the debt but it may help you to avoid getting into the same situation in future once you have dealt with this debt.   

GFU123 said:

I've tried transferring to 0% balance cards, but these card debts have had a bad effect on my credit score, so I've been rejected. 

GFU123 said:

I've looked at getting a loan to consolidate these card debts, but because of my credit score the interest rates I am offered are quite high. 

Errrrr.... No.  Your assumption in both these cases is incorrect.  Your score is nothing more than a randomly generated number produces for entertainment purposes only.  It play not part in lending decisions.  You issue with the interest free card and consolidation loan will primarily be down to the amount of debt that you are carrying.     

GFU123 said:

I feel like these debts are going to follow me around for the rest of my life because at this rate I will never be able to pay them off. I would be grateful for any suggestions or tips!

They won't.  There will be a way of dealing with them but it will involve some short or even medium term pain as you are going to have to clear this the hard way.  Post an SOA on the Debt Free Wannabe boards the the guys over there will give you some great advice and support.