Bit of debt advice please

adpom

Hi Guys, I’m new to the forum and just after a bit of debt advice 

So recently I woke up and realised I’m 43 next month I have £22k of debt (2 loans, 4 credit cards(1 is only £200) and Klarna £299) and zero savings  

1 of my loans has only £606 on it left and I plan on paying it off next week, this will free up £202 a month but I’m unsure what to do with the £202 as my plan is to try and get a 20k loan(my credit score low) to pay off everything else. Would free up close to £500 a month 

so I was thinking of paying off Klarna and then the £200 credit card(then unsure if to cancel it or keep it at 0) to boost my credit score to get the loan. 

Is this a good idea or should I try something else?

thank you 

adpom

Sorry forgot to mention my income around £40k a year 

Grumpelstiltskin

Getting a loan is not the answer, all you are doing is moving the debt sideways.

What are the interest rates? You can start by paying the others plus a couple of pence over the minimum and throw everything else at the highest interest one, once that is cleared move on to the next highest.

Or you could pay off the smallest amount and carry one working up. It's up to you.

RAS

Loans don't pay off credit card debt; they push it sideways and are often replaced more credit card debt.

And although the payments are lower, frequently you end you paying back more over a longer period.

Do you know how this debt has accrued? Do you have a detailed budget/ statement of affairs that accounts for all your spending? If not, drag out the last 6 month's statements and give every spend a home. That'll give you an idea what's needed to fund your current lifestyle and where savings might be made.

As for the £202, open an ISA with a good rate which allows a few withdrawals and once Klarna and the £200 credit card are cleared, stash 6 month's in the ISA, then split it between debt payment and the ISA until you've got a month's income covered.

adpom

Grumpelstiltskin said:

Getting a loan is not the answer, all you are doing is moving the debt sideways.

What are the interest rates? You can start by paying the others plus a couple of pence over the minimum and throw everything else at the highest interest one, once that is cleared move on to the next highest.

Or you could pay off the smallest amount and carry one working up. It's up to you.

Thank you for the reply my credit cards are high interest rates with high amounts on them 
7300 with 34%. £300 a month 

3900 with 37%  £200 a month 
2400 with 24% £115 a month 
6556 loan £264 a month 

that’s why I was thinking of a loan to clear everything 

adpom

RAS said:

Loans don't pay off credit card debt; they push it sideways and are often replaced more credit card debt.

And although the payments are lower, frequently you end you paying back more over a longer period.

Do you know how this debt has accrued? Do you have a detailed budget/ statement of affairs that accounts for all your spending? If not, drag out the last 6 month's statements and give every spend a home. That'll give you an idea what's needed to fund your current lifestyle and where savings might be made.

As for the £202, open an ISA with a good rate which allows a few withdrawals and once Klarna and the £200 credit card are cleared, stash 6 month's in the ISA, then split it between debt payment and the ISA until you've got a month's income covered.

I’ve been an idiot with my credit cards an now I want rid of them, I wouldn’t get another credit card as they just eat your money, I’ve finally learned this lol

thanks for the ISA advice 

londoner2019

Agreed with other posters - there are literally hundreds of stories on this forum whereby a consolidation loan has resulted in the debt just piling up even higher. It happened to me when I had run out of a 0% CC deal, got a second one to shift the balance, and it just built up.

Do an SOA, as others have suggested, figure out what is a manageable, realistic budget to stick to (not an aspirational one - build in budget for emergencies, typical annual spends such as insurance/car service/gifts/holidays) and then you can figure out what you can afford to pay off each month.

Then tackle the one with the highest interest first (or knock off one of the small balances to give yourself a motivational boost).

But please do not get the loan - it looks like a good idea but it almost never is.

RAS

As Grumpelstiltin says, paying the minimum on credit cards marks you as a problematic debtor. And those interest rates don't help. 

You need to set the DD to a little more the minimum on all of them. Unless the £200 is Barclays, close that, they are good at 0% offers. 

You really need do that statement of affairs, look at www.lemonfool.co.uk, and identify savings. Got anything you've bought and no longer use that you can sell? Car boot time is round the corner.

Then pay everything spare against the 37% card.

MEM62

adpom said:

So recently I woke up and realised I’m 43 next month I have £22k of debt (2 loans, 4 credit cards(1 is only £200) and Klarna £299) and zero savings  

A lightbulb moment? 

adpom said:

my plan is to try and get a 20k loan(my credit score low) to pay off everything else.

You cannot borrow your way out of debt.  Pay minimums on everything where you have the choice and throw all the rest at the debt with the highest interest.  Once that is clear move onto the next one and so forth. 

adpom said:

Sorry forgot to mention my income around £40k a year 

Which does not tell us much without details of your outgoings / financial commitments.  

adpom

londoner2019 said:

Agreed with other posters - there are literally hundreds of stories on this forum whereby a consolidation loan has resulted in the debt just piling up even higher. It happened to me when I had run out of a 0% CC deal, got a second one to shift the balance, and it just built up.

Do an SOA, as others have suggested, figure out what is a manageable, realistic budget to stick to (not an aspirational one - build in budget for emergencies, typical annual spends such as insurance/car service/gifts/holidays) and then you can figure out what you can afford to pay off each month.

Then tackle the one with the highest interest first (or knock off one of the small balances to give yourself a motivational boost).

But please do not get the loan - it looks like a good idea but it almost never is.

Thanks for the advice, I tried to do the SOA but because I have a motabilty car it wouldn’t work as I wasnt putting extra detail in about the car, I’ll have to try it again

enthusiasticsaver

A consolidation loan is not a good idea.  If you cannot move your cards on to 0% deals then you will not get a loan at a good rate either and paying it off over a longer period will cost you a lot more.  If you do a soa that will help us advise further but I would not recommend a £20k loan. Can any of the cards be moved to 0%?  You can do a soft search on MSE to see if you would be eligible for any deals.  Tackle that 39% card first.  Forget about credit scores.  They mean nothing.