Advice required

Grumpy_chap

zAndy1 said:

Just paid the barclaycard £700 off , one down, five to go (credit cards)

That's a good start.
Did you also cut the card up?

kimwp

So... it's great that you are trying to get these debts down. A few things;

1. Remember to take into account any charges for balance transfers and how quickly you could pay it off - paying to transfer a balance and then paying it off quickly may not save you money.

2. I can't see a Halifax £367 amount in your SOA (and the Halifax Apr is 0%?)

3. Tackling the most expensive debt first means paying the minimum (plus £1 to avoid triggering concerns about only being able to pay the min) to everything apart from the account you are concentrating on. You can choose to focus on the most expensive debt (financially better) or smallest debt (helps reduce the number of debts which can help with morale), but paying significant amounts over the minimum on all of them (as you are doing) is a bit of an unhelpful half-way house - it's not the most sensible financially and it won't cause the number of debts to go down quickly.

4. To use an analogy. Don't think about the TFLS until you are in a sink hole. You have been drifting towards a hole, but you have a strong engine (income) and experienced navigators (us) to help you get away from it. The TFLS is the helicopter to get you out, but you only have one so you need to keep it for an emergency. It's going to cost you some fuel, but you'll learn to spot and navigate these sinkholes so you can keep that helicopter for a real emergency where you have no other option (or a fancy trip to the Bahamas). 

So the next question is- do you want to focus on the most expensive debt first or reducing the number of debts?

jimi_man

It’s also worth bearing in mind that some card companies, when you phone up to close them, will offer you 0% balance transfer as an incentive to keep them open. That’s happened to me as well as other people I know. 

zAndy1

One comment regarding closing accounts is that it can go against you in that you end up with a higher % utilisation of available credit. Like the Barclaycard one has a credit limit of about £17k and a balance now of £0 so that's helping my overall credit utilisation. Close it and my credit utilisation will inevitably increase quite a lot. Plus while I'm on the hunt for a good balance transfer offer it seems counterintuitive to close accounts down that could offer me one. If I ring up and say I want to close the account and they don't offer a balance transfer I'm a bit snookered really. I have no intention of using the accounts I'm paying off but I'm not going to be too hasty about closing them down right now for the reasons I've pointed out. 

zAndy1

kimwp said:

So... it's great that you are trying to get these debts down. A few things;

1. Remember to take into account any charges for balance transfers and how quickly you could pay it off - paying to transfer a balance and then paying it off quickly may not save you money.

Yes I'm bearing that in mind and did that calculation before doing the balance transfers I mentioned

2. I can't see a Halifax £367 amount in your SOA (and the Halifax Apr is 0%?)

Apologies I got lazy, £367 of the halifax balance on the SOA was at the standard rate, the rest at 0%

3. Tackling the most expensive debt first means paying the minimum (plus £1 to avoid triggering concerns about only being able to pay the min) to everything apart from the account you are concentrating on. You can choose to focus on the most expensive debt (financially better) or smallest debt (helps reduce the number of debts which can help with morale), but paying significant amounts over the minimum on all of them (as you are doing) is a bit of an unhelpful half-way house - it's not the most sensible financially and it won't cause the number of debts to go down quickly.

Good point, will bear that in mind going forward

4. To use an analogy. Don't think about the TFLS until you are in a sink hole. You have been drifting towards a hole, but you have a strong engine (income) and experienced navigators (us) to help you get away from it. The TFLS is the helicopter to get you out, but you only have one so you need to keep it for an emergency. It's going to cost you some fuel, but you'll learn to spot and navigate these sinkholes so you can keep that helicopter for a real emergency where you have no other option (or a fancy trip to the Bahamas). 

Point taken

So the next question is- do you want to focus on the most expensive debt first or reducing the number of debts?

I think focusing on the debts with the shortest promotional rate time left is probably wise but also tempted to concentrate on Nationwide really seeing as £3.5k of that is at 12.9% so incurring about £37pm interest...

See answers in bold above

Martico

zAndy1 said:

One comment regarding closing accounts is that it can go against you in that you end up with a higher % utilisation of available credit. Like the Barclaycard one has a credit limit of about £17k and a balance now of £0 so that's helping my overall credit utilisation. Close it and my credit utilisation will inevitably increase quite a lot. Plus while I'm on the hunt for a good balance transfer offer it seems counterintuitive to close accounts down that could offer me one. If I ring up and say I want to close the account and they don't offer a balance transfer I'm a bit snookered really. I have no intention of using the accounts I'm paying off but I'm not going to be too hasty about closing them down right now for the reasons I've pointed out. 

Hello - new to the thread, but I've been reading. 
I'd agree with this - on the proviso of course that it's not something to revert back to bad habits with. 
Barclaycard have been good for me with periodic decent 0% transfer offers, so I get this reluctance to cut it up. 
Good to see you're making progress, good luck

kimwp

zAndy1 said:

One comment regarding closing accounts is that it can go against you in that you end up with a higher % utilisation of available credit. Like the Barclaycard one has a credit limit of about £17k and a balance now of £0 so that's helping my overall credit utilisation. Close it and my credit utilisation will inevitably increase quite a lot. Plus while I'm on the hunt for a good balance transfer offer it seems counterintuitive to close accounts down that could offer me one. If I ring up and say I want to close the account and they don't offer a balance transfer I'm a bit snookered really. I have no intention of using the accounts I'm paying off but I'm not going to be too hasty about closing them down right now for the reasons I've pointed out. 

So this is when it becomes a little murky in terms of the best thing to do;
1. a low credit utilisation (below 30%) across accounts and for each individual one improves a credit score
2. however there's a limit to the amount of credit that a creditor is willing to give you, so being close to that limit might mean a creditor is less willing to give you credit
3. Also, everything online about utilisation is about the impact on your credit score, however the banks have their own criteria (which they don't share) and most won't look at your credit score (which is not to say that the same criteria won't be looked at)
Just things to consider really - the main thing is to not use more credit (which I know is your intent) and as you start to have a reasonable utilisation, start closing down accounts - putting time between closing accounts and applying for new ones for a steady recent credit history.

zAndy1 said:

kimwp said:

3. Tackling the most expensive debt first means paying the minimum (plus £1 to avoid triggering concerns about only being able to pay the min) to everything apart from the account you are concentrating on. You can choose to focus on the most expensive debt (financially better) or smallest debt (helps reduce the number of debts which can help with morale), but paying significant amounts over the minimum on all of them (as you are doing) is a bit of an unhelpful half-way house - it's not the most sensible financially and it won't cause the number of debts to go down quickly.

Good point, will bear that in mind going forward

So the next question is- do you want to focus on the most expensive debt first or reducing the number of debts?

I think focusing on the debts with the shortest promotional rate time left is probably wise but also tempted to concentrate on Nationwide really seeing as £3.5k of that is at 12.9% so incurring about £37pm interest...

See answers in bold above

If focusing on the debts with the shortest promotional time at 0% means paying them off, you'd be better putting the money in the highest rate savings account you can find and then paying them off when the promotional period ends (assuming you will have the discipline to not dip into those savings). 

You can play numbers with a spreadsheet and work out the best strategy, in terms of when promotional rates end but it's simplest to periodically see if there are balance transfers etc to reduce your interest and then overpay on the most expensive debt you have at the time or coming up shortly - otherwise you could tie yourself in knots with what-ifs that probably won't get a much better strategy.  

It's also worth re-iterating that you really do need to understand how you have got into this debt. If you do genuinely have a £1500 surplus each month, then how have you got a £57,000 debt? 

DrEskimo

kimwp said:

It's also worth re-iterating that you really do need to understand how you have got into this debt. If you do genuinely have a £1500 surplus each month, then how have you got a £57,000 debt? 

I was going to reiterate the same thing. 

I also think it’s worth putting a lot more effort into the budget, where the first step is to understand your current spending fully. 

Without a fully worked up budget for everything (direct debits, day to day spending, annual spends, high value replacements), you risk using money on debt that should have been budgeted for say the boiler replacement fund.

you just end up needing to use credit again….

how about a starter emergency fund? I think following something like Dave Ramseys baby steps will help here.

enthusiasticsaver

zAndy1 said:

enthusiasticsaver said:

That’s a good start. Are you closing them as you clear them? 

Which one are you tackling next?

I've moved the amounts that were at standard rate on Lloyds (£402) and Halifax (£367) to a 6 month interest free balance transfer and will pay that off over the next 6 months. Not 100% sure which to tackle next really, I guess the Nationwide £3500 at 12.9% makes most sense really, going to see if I can transfer some of that to the same 6 month interest free offer I take advantage of for Lloyds and Halifax. 
So far this month I've paid £175 off MBNA (min £120), £150 off Virgin (min £105), the £700 previously mentioned to pay off Barclaycard, going to pay Nationwide probably £200 today (min £146). Might pay an extra £200 off the mortgage this month like I did last month, a drop in the ocean really but I just feel like I need to start doing something on the mortgage as well....
BTW you said 'Yes I would sort the unsecured  debt now given you have the means to sort it before interest rates escalate on it'. There's no way I can pay all the unsecured debt off before the interest rates increase from April next year, well not without using my TFLS anyway....

Paying more than minimums is good so you are doing the right things. I realise you can’t clear the unsecured debt before the promotional deals finish but if you are able to make a good dent in it by April then there is every chance you will get new deals for at least some of it. 

zAndy1

Hi all, just an update really. I've been paying as much as I can off cards, it's slow going and isn't being helped by the fact my mortgage interest rate has now risen to 7.14% making our monthly mortgage interest payments £977pm (it was < £500 earlier this year).
I honestly cannot see a way out of this situation without taking the tax free lump sum from my pension , paying my debts off and using that money I was paying off credit cards each month to overpay the mortgage. What else am I supposed to do? Doing that will enable me to max out my pension contributions hence making the most of the salary sacrifice scheme I'm in, overpay my mortgage by at least £1000pm and still leave some over to be able to live fairly comfortably. Not doing that will almost certainly mean my credit card payments increasing due to low interest promotional rates ending in the next few months which will mean I won't make hardly any dent in the credit card debt and won't be able to overpay the mortgage. That's not a situation I want to find myself in.
There are always exceptions to the usual sensible advice i.e. don't take a tax free lump sum. I think in my case the situation is so bad that I honestly feel like I have no alternative and that actually it's the sensible and prudent thing to do right now. I'm going to ring the mortgage company and see if there are any options there , but actually taking the lump sum and paying debts off puts us in a much stronger position to remortgage as well although having said that given I'm 55 remortgaging onto a repayment mortgage with much higher payments scares  me slightly in case I am made redundant and we can't afford the mortgage payments , at least paying interest only and overpaying what we can gives us some flexibility in that respect but remortgaging is definitely something I will be looking at early next year as 7.14% interest is ridiculous really, even in the current climate.