Partner come clean about credit card debt, I'm a novice.

Skylarker1

First post here, appreciate any help in advance.

My partner has come clean to having around £10,000 credit card debt, £2500 catalogue debt, £4000 left on a loan and every month hitting her £1800 overdraft limit.

I completely accept her reasons for being in this position and want to help but I have no experience with credit cards or debt management, therefore, I've had to do some reading. Upon finding out I've made it clear she cannot incur anymore debt and we must focus on paying it off ASAP. I will help to ensure the debt doesn't increase, and I am confident in this.

My initial thoughts are to ignore the loan, that will be finished next summer and to first tackle the overdraft so she is spending her own money, so to speak, and seeing herself in the positive and not negative should help a lot, mentally. I have created a shared spreadsheet and completed a monthly budget so she can see where everything is going. I will send money to ensure the overdraft is cleared over the next couple of months and then attempt to build her current account up with a buffer.

Regarding the credit card and catalogue debt, I have been reading about 0% balance transfer cards and think this is the best option?

I have completed the eligibility calculator on MSE and she has 80% approval chance of a Virgin Money card at 0% for 14 months = £900 a month to clear it in 14 months. (This may be difficult to do) She doesn't get anymore likely offers, obviously based on her risk being high to lenders.

I had an idea, as all I have is a mortgage that I have paid for 7 years that I have never missed a payment for and I have zero use of a credit card. I am wondering if we can move these two debts to a balance transfer card in my name? (from reading here, it seems Barclaycard allows this?)

I have 100% pre-approved Barclaycard at 0% for 28 months which has a fee of 3.49%. There is also a Barclaycard at 0% for 20 months with a fee of 1.99%. Doing the maths and coming up with a monthly figure we can afford together, we can pay all this off in 17 months.

Issue I have, is not having any experience in this and transferring over £12,000 debt into my name without knowing the ins and outs of how these things work. 

- If I keep up with payments they won't take away the 0% offer for 20 months and leave me on 24% APR? 
- I did an eligibility check on Barclaycard website and part of that I entered the amount I wish to balance transfer, I was told I was eligible, should I be confident I can do the full amount needed on the two balance transfers?
- Will I know how much I can balance transfer before getting the card?

It is at this point I am not really sure what else I am asking or need to be aware of, so if anyone see's any holes in this or has any warnings, it would be greatly appreciated!

Many thanks and apologies for the ramble! 

kimwp

Hiya! We normally recommend that the person in debt is encouraged to sort the situation themselves, though it's usually a parent trying to help a child or a friend. 

I think this might be better on the debt free wannabe board, could an admin consider moving it please?

molerat

The biggest thing to bear in mind is that if you move the debt to a card in your name it becomes your debt.  If the relationship breaks down it is still your debt.

You will not be able to BT the catalogue debt, you would need a money transfer deal to do that.

And, as above, DFW is the best place for this.

Skylarker1

Apologies for posting in the wrong board and thank you for the responses.

kimwp

Skylarker1 said:

Apologies for posting in the wrong board and thank you for the responses.

Oh, sorry, don't worry that you posted here, we're just getting it moved so you'll get the best help. 

EssexHebridean

Aaaand you're now on DFW, so all good! 

Firstly, don't underestimate how tough it will have been for her to tell you about the debt. 

I'd concur with the viewpoint above that usually, for the person with the debt to actually do the paying off is better. The reason for this is that the act of "going through the process" is in itself a great tool for both education and changing lifestyles. If you give money to clear the overdraft for example, there is a far great chance that your partner's spending will just continue as it has done, rather than her learning to budget and live to her income. 

The usual suggestion is that the best help you can give is to be understanding, to sit down and go through things with the person, to help them draw up a budget, to make sure that if appropriate you are paying a proportionate part of household expenses (if you are living together) based on both income and outgoings. All of those things are more constructive than "throwing money at the situation". 

She should definitely go for the 0% BT card  - any money she can get transferred to that is money she is not paying interest on after all, even if she can't clear the balance by the end of the 0% period, it's still a win. My suggestion would be that she moves what she can over there, then sets the monthly payment to an amount just above the minimum (so if the monthly minimum is £243 for example, you might set the payment to £250) and then makes a diary reminder for 2 months ahead of the 0% period expiring to remind her about it.  She must not use that card at all though once that is in place.  Then in 3 - 4 months, look again at an eligibility calculator to see if she stands any chance of another transfer - if so, that will take some more interest bearing debt. Rinse and repeat. 

Her payments should be focusing on the first instance on the highest interest rates, but I'm inclined to agree with you that ignoring the loan for the moment may well be the way forwards unless that is really high interest. Just let the payments go out on that and get her to focus on overdraft first, then the highest interest rate card. 

I would personally urge you not to take on the debt yourself. 

Skylarker1

Thank you for your response. 

I completely understand how hard it was for her to tell me and completely accept her reasons for how and why this happened. This helps massively.

The reason I suggested transferring the debt into my name is due to the fact it opens it up to being more manageable for her/us and allows it to be cleared quicker. Of course I have a massive worry in the back of my mind about the future so this was a last last resort idea. Thank you for your words regarding this.

What other options are available if she cannot get a 0% balance transfer card, as I am worried an 80% approval chance and only two offers means it will mode than likely be refused on application.

Her personal income can cover her current costs including the debt payments, once we get her out of her overdraft in current account. 

EssexHebridean

No - an 80% chance means that for every 10 people in your partners position who apply, then 8 of them will be accepted - that means she is more likely to BE accepted than not. That doesn't sound so bad, does it? Is the eligibility checker you've done the MSE one, or somewhere else? 

Getting shot of the overdraft will almost certainly open up some better options for her down the line - as that may well be affecting her credit file at the moment. lenders get very twitchy about OD debt as it's a "dangerous" one - it can be recalled at any time and also gives off a red flag that someone may not be great at managing their money and so is a greater risk. 

I'd suggest taking things one step at a time right now - try not to focus too much on "what ifs" at this stage. :-) 

RAS

You understand how your partner got into debt, or at least how she thinks that happened. How does she think she could get out of the debt? 

It's important that she learns that she is competent financially, not relying on you to sort it out mentally or financially. OK, in the short-term you might pick up the tab if the "boiler breaks down."

But she needs to look at what she's spending on and rein back as much as possible, flog a bit if possible, look at the up your income forum and try for a 0% card, knowing she might not get it. And learn to pick herself up if things don't go her way.

With a shoulder to cry on if necessary, someone sympathetic to talk to and someone who can encourage her to manage the recovery,

Skylarker1

Honestly, she has no clue about how to get out of it, which is why I think I have taken the response to it I have. I wanted to show her it is always salvageable as long as you don't bury your head and try give her a plan out of it. However, it makes sense what you have all said about letting her take control of it.

I have helped her budget and get her finances down into a spreadsheet. Other than changing mobile phone contracts which should save roughly £30 a month there isn't much else she can do with two children and already cutting back to the minimum on everything. Paying the loan, credit card and catalogue off is takin up exactly half of her monthly income.

I am worried if I don't help we might never be able to set ourselves up together, buying a house and settling for our kids. I am going to take a step back based on your feedback and just encourage, so thank you.

kimwp

Do you think she could be encouraged to post on here? You've done most of the steps that we would advise (see the first steps stickie at the top of the board), the next step is getting advice specific to the circumstances. If she posts, she can ask literally any question about the debt, paying it off, talk about how it's making her feel and she'll get answers and support - it might help her feel less clueless. I think you've done a fab job in supporting and helping her so far - the forum (or there are other money forums, but I know we give sound advice here) is a really convenient place to get answers rather than trying to Google all possibilities.