How to tackle my credit card debt

sinlo

Any help on the best way to tackle my credit card debts would be much appreciated.  The past 3 years I feel like I have gotten nowhere with paying my debts. I had 2 years reduced income due to illness and in that time have wracked up 17k worth of credit card debt and 6k in a loan.  I have been managing to pay these just over minimum payments monthly but seem to be getting nowhere due to a hefty car repair bill before Christmas.  I am determined to get these cleared and would love to do it but feel I ned help on how to approach it.  I also came across updraft and they have offered me a consolidation loan and would appreciate your views.  

Aqua - £1800 34.8% 
MBNA - £5100 27.13%
Barclay - £7000 24.9%
Halifax - £4100 25.49%
Halifax £3000 0% to Jan 25

Halifax Loan Balance now £6200 6.9% 32 months remaining £221pm

Updraft have offered me 10.5k @ 19.9% to clear some cards.  £278 over 60 months.  I'm not keen on taking more debt as I know this is not clearing debt just moving to another provider but this is my thought process :

I take this to pay off anything with a higher interest rate than the 19.9%.  Monthly pay the updraft loan, halifax loan and any remaining monies pay off remaining card debt.  Once card debt is clear then add these payments and try to pay updraft loan off early.  I know I should only take this loan if I can commit to changing my spending habits and cutting up the cards.

My second option is not to take the loan and find an order best to tackle the credit cards.  Should I be clearing highest balance first, lowest balance first or highest apr?? 

I cannot fall behind and default any accounts as I have a mortgage that is due off a fixed rate in 2 years.  I have never missed a payment on anything and my credit file is good apart from debt level.  I have increased my monthly income by match betting and it has allowed me £800pm to tackle my debts although it is a tight squeeze.  

MorningcoffeeIV

Forget the consolidation loan.

Tackle the debts with your own cash - highest rate first.

sinlo

Thank you for replying.  Can I ask why it is that I shouldn't consolidate the higher APR's with the loan?  100% trust the advice on here, just for my own understanding.

sinlo

Also is there a template or calculator i can use on here that will let me input what i plan to pay each month and give me a balance forecast?

fatbelly

That's a definite no to the consolidation loan.

Get as much of the card debt on to 0% as you can

https://www.moneysavingexpert.com/credit-cards/balance-transfer-credit-cards/

And overpay the highest apr of whatever is left

There's a snowball calculator at

https://www.lemonfool.co.uk/financecalculators/snowball-calculator.php

Just pay the halifax loan as it is - that apr is ok

Post a statement of affairs for help in squeezing a bit more from your budget

Andyjflet

Its difficult to provide a more detailed answer as you don't mention your other outgoings or income, I would recommend posting your full SOA so that more accurate and applicable advice can be offered.

Taking a consolidation loan is just kicking the can down the road, its about mindset really, depending on income I think you should start using the avalanche method and get intense on paying these debts down, if you can clear the Aqua quickly thats a great start. 

Andyjflet

Here is the link to the SOA, format it for MSE and post on here for some very good advice.

https://www.lemonfool.co.uk/financecalculators/soa.php

Martico

As you point out, you understand that a consolidation loan merely shuffles the debt from one place to another. And the interest rate of 19.9% is awful - almost as bad as your cards. Prioritise the card with the highest interest rate, keeping chipping away with at least minimums to the others, and in time you may start to get some 0% BT deals, which are a lot kinder and more flexible than a consolidation loan (yes, they also move rather than repay debt, but at a fraction of the cost when and if you're accepted)

pdel61

If you can get any more 0% transfers then do them and get as much of the Aqua onto them as possible. Pay the minimum you can against the rest and the rest to clearing the Aqua CC. After that work on the MBNA one.

horsewithnoname

sinlo said:

Thank you for replying.  Can I ask why it is that I shouldn't consolidate the higher APR's with the loan?  100% trust the advice on here, just for my own understanding.

I don’t understand why you wouldn’t move your debt to a lower rate of interest either. Why pay 30+% when you can pay below 20%?

kimwp

horsewithnoname said:

sinlo said:

Thank you for replying.  Can I ask why it is that I shouldn't consolidate the higher APR's with the loan?  100% trust the advice on here, just for my own understanding.

I don’t understand why you wouldn’t move your debt to a lower rate of interest either. Why pay 30+% when you can pay below 20%?

It's not a one size fits all, but a one size fits most, which is that most people that consolidate end up (in the combined thousands of years experience of this board) in more debt - because their outgoings go down and they start overspending again. It doesn't seem to be the case with 0% credit cards, perhaps because there is a deadline.

The key is to get in the habit of spending less than your income, in order to pay off the debt and then start saving to get into a secure financial position.