Credit card debt has spiralled

MrFrugalFever

It is financial madness to borrow your way out of borrowing unless it is at 0% like your CC.

Have you tried an eligibility check for a Money Transfer credit card, this could be the avenue to take for the store cards as opposed to a 17.9% updraft loan.

TheAble

I'm not convinced about this loan idea. While you've made it sound cogent enough I think you risk tying yourself in even more knots. What's needed is the change of mindset and you won't get that from the illusory relief that consolidation brings. Many have tried it and don't have a happy tale to tell.

In your case I'd probably recommend the Ramsey method of focusing on your smallest debt first (make sure you have DDs set up for the minimums on the others), then the next smallest and cancelling each account as you go. With the DDs in place just forget about the larger debts until they become the next on your list. 

And good luck

BlueManc10

TheAble said:

I'm not convinced about this loan idea. While you've made it sound cogent enough I think you risk tying yourself in even more knots. What's needed is the change of mindset and you won't get that from the illusory relief that consolidation brings. Many have tried it and don't have a happy tale to tell.

In your case I'd probably recommend the Ramsey method of focusing on your smallest debt first (make sure you have DDs set up for the minimums on the others), then the next smallest and cancelling each account as you go. With the DDs in place just forget about the larger debts until they become the next on your list. 

And good luck

I think after reading through the advice on here I'm going to can the loan idea now. No one has said the loan/consolidation idea is the best method and a lot of you are more savvy than me jn my current situation. So I will start with the balance transfer and then transfer the smallest balances onto this card. And then as I move through if I get anymore BT offers, move the high interest debts onto here and close each account as it's paid off. 

BlueManc10

Hi all. Sorry, and again forgive my ignorance. But now I've decided against the loan option thanks to your advice. What do you suggest I do with the £3k balance transfer card? Transfer the two smaller balances and get those closed asap as that's technically what the snowball method entails? As the £3k would cover almost all of those? Or transfer £3k from the highest interest card split that over 22 months and pay this alongside my snowballing? Also conscious of transfer fees if I transfer from multiple cards. 

enthusiasticsaver

BlueManc10 said:

Hi all. Sorry, and again forgive my ignorance. But now I've decided against the loan option thanks to your advice. What do you suggest I do with the £3k balance transfer card? Transfer the two smaller balances and get those closed asap as that's technically what the snowball method entails? As the £3k would cover almost all of those? Or transfer £3k from the highest interest card split that over 22 months and pay this alongside my snowballing? Also conscious of transfer fees if I transfer from multiple cards. 

I am glad you have decided against the debt consolidation loan. I would use the £3k 0% to BT the smallest CC and as much of the next smallest as possible. Tackling the expensive store cards should be a priority. Once you get your finances in a better position there may be more 0% deals available. In the meantime focus on getting your outgoings as low as possible.

Martico

Wise move I reckon. For me it would be a toss-up between the lowest balance ( to clear and be done with) and the one bearing the highest interest rate. I'd favour hitting the highest rate one first, but I see the psychological advantage of the lowest balance.

And then, pay off the 0% card at the minimum required while throwing everything you can at the ones (store) with the highest interest rate. Once that one is done, hammer away at the one with the next highest rate

BlueManc10

Further update guys. I think I may have been accepted for another 0% BT for 18 months.  Not sure what amount as yet but I did an eligibility check and it said I had a "great chance" just awaiting final decision. Hopefully this will be another chunk I can transfer. 

Interestingly it's also 0% on money transfers for 12 months so potentially could transfer some cash to pay off the store accounts with very/next?  Will let you know when/if I'm accepted and what limit I'm given. 

redux

Check whether all the 0% transfer offers can also be used for money transfer

If so, then as you suggest do some of this to your bank account, then clear the store cards first as these are the highest interest rates.

Although folks here have recommended against the loan, the main reason for this advice is that people can tend to run up more spending on the cleared cards and end up in as much or more mess. If you're convinced you can be disciplined, maybe a loan is worth considering, maybe for not quite such a large amount, if it will be at lower rate than the about 24% on a couple of the cards

And maybe it is worth keeping one card active for current spending, and religiously pay this back in full each month before the due date on the statement. That keeps a few hundred more out of having interest charged on it.

BlueManc10

So i have been doing some further digging, and I did still have some promotional offers active, which I didn't even realise. So in terms of my debts, this is where i currently am. 

Credit Cards
Company	Interest Rate	Balance	0% Until
Tesco	24.6%	£        595.30	-
HSBC	24.9%	£     4,316.03	-
Virgin Money	0.0%	£     2,080.00	31/01/2024
Virgin Money	26.5%	£     4,554.08	-
Barclaycard	0.0%	£     2,876.00	07/08/2023
Barclaycard	0.0%	£     1,551.00	01/03/2024
Barclaycard	0.0%	£     2,062.00	01/02/2024
Barclaycard	26.6%	£        237.12
	Total	£  18,271.53
Credit Accounts
Very	44.9%	£     1,200.00
Next	24.9%	£        783.30
	Total	£     1,983.30

I obviously have the 3k 0% card on its way with potential of another fingers crossed, so what am I best transferring, what is ok to leave as is, and how do these companies allocate payments? So if I did a balance transfer form the Barclaycard, would that come from the £2876 pot that the 0% ends on next month? As obviously where I have 0% offers still active, I want to keep them. 

kimwp

Sorry, not had a chance to think about this, but a couple more thoughts - you have to be very careful about how you do this, but you can effectively transfer debt from the higher interest accounts to lower/zero by putting your monthly spends on 0% cards and using the cash to pay off the higher interest accounts - just make sure you don't end up with more debt overall.

I get where you are coming from with the loan - it seems sensible to reduce the interest being charged on debt. Debt consolidation for fewer/lower monthly payment rings alarm bells on here because often people who do it end up using the freed money for extending their lifestyle and almost invariably end up in more debt. Also, I don't think you'd be able to use balance transfer offers to pay it off, so you would have to get a rarer money transfer or you'd be stuck with the interest rate while paying it off each month. If you're aware of these possible disadvantages, but it still makes financial sense then I don't think it should automatically be ruled out.