The Best Option

samejandwee

Hello everyone, I’m new.

I find myself with £13,898 debt. It’s affordable with monthly payments and mostly accrued during my youth.

I’m in a mature position in life to now want to start clearing it as my payments on debt each month are approx £600/month. With two young children and a different lifestyle now, it’s time to get rid and enjoy an extra £600 each month.

This debt is across a Halifax credit card, PayPal credit, Halifax overdraft and car finance.

I am paying varying rates of interest and have multiple direct debits.

I am not knowledgeable in all things finance but I like the idea of consolidating it all into one monthly payment. I am disciplined and motivated to just get it sorted.

I have read a little bit about personal loans and money transfer credit cards.

My initial thought was to get a £14,000 loan and pay off £600 a month which is my current monthly payments. This would give me a date in sight and only one payment to worry about.

My questions are this:

1. Am I being naive in consolidating and is this a bad idea?

2. Should I consider money transfer or personal loan?

3. I also welcome any other advice or tips.

thanks again!

Grumpelstiltskin

All you are doing with consolidating is moving the debt sideways.

Can you give us details of amounts owed, interest rates, etc. and that could help us to come up with a solution.

Superhoopza

Lots of people will advise to not consolidate but if it means it makes it easier for you and saves you interest (you'd need to list all your balances and interest rates) and trust yourself to pay these off with the loan and not wrack up the debts again, then go for it. People rightly here don't suggest it as it has led to many people (me included) wracking up more debts from doing so, but one sizes does not fit all and if you back yourself to make it work and can get the loan at a good rate, then you shouldn't be put off from doing so.

gwynlas

If you can be really disciplined a personal loan might offer you a better rate of interest than you are currently paying overall. However if like the majority of users here myself included it is very tempting to carry on using credit cards. There is the concept of snowballing that you can read on here where you concentrate on paying off your largest interest accounts first.

kimwp

It really depends on the interest rates, you need to be aiming to get your interest rates as low as possible (any balance transfers possible?), so the money you put towards the debt is paying the capital off.

fatbelly

Money transfer cards are not easy to get but if you can then they are one of the few 0% deals

https://www.moneysavingexpert.com/credit-cards/money-transfers/

However you have a Halifax credit card that could use a balance transfer card

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

As for the overdraft, get rid as a priority

https://www.moneysavingexpert.com/banking/cut-overdraft-costs/

You'll need to give us more detail on the car finance.

Note none of these suggestions include long term interest bearing loans

samejandwee

Hey Everyone!

The details you need are below, happy solving!

Car Finance = £2588.93 / £152.29 month (11.9%)

Credit Card = £6,083.65 / £263.29 month (24.66%)

Paypal Credit = £4,525.73 / £155.62 month (23.9%)

Overdraft = £700 / £50 month (No Fees)

kimwp

A good approach if you get these cards and are disciplined to pay off the debt is-
1. Balance transfer the credit card to a 0% card (consider the fees and offer time) to make sure this makes financial sense
2. Money transfer the PayPal credit (same advice as above). 
3. Set all but your highest interest debts to the minimum +£1 and focus on putting as much as you can to the highest interest debts until it is paid off. 
4. Repeat step 3.

See fatbelly's post for links.

Are you reducing the overdraft by £50 each month or is it getting used again?

Are the values above the minimum payments? If so, can you afford to throw more at the debt?

samejandwee

These are the minimum payments for these debts. The only one which can be lowered is the overdraft payment as that’s manual.

The overdraft is on an old current account and dormant with just the OD. Never used, just reducing by £50 each month.

I see the clear advantage of locking them all in on 0% and then pay off but is there any logic in putting it all into one payment? Loan or money transfer etc? 

kimwp

samejandwee said:

These are the minimum payments for these debts. The only one which can be lowered is the overdraft payment as that’s manual.

The overdraft is on an old current account and dormant with just the OD. Never used, just reducing by £50 each month.

I see the clear advantage of locking them all in on 0% and then pay off but is there any logic in putting it all into one payment? Loan or money transfer etc? 

There's a high prevalence of people consolidating and ending up in more debt, perhaps because it feels like the issue has been solved and the habits that caused the debt don't get addressed. The method described above maintains a focus on paying down the debt through active money management, which drives the debt down and makes money management second nature, so once the debt is paid off, savings start to build.

If you
- aren't accruing debt and won't take on more
- will put the same amount or more to pay off the loan (find one that you can overpay without penalty)
- only put debt with interest rates higher than the loan into a loan (Ideally after you have tried to move them to 0% to pay the least interest and pay the debts down faster)
Then it can make financial sense to put the debt onto a reduced interest loan. It's generally not advised here due the number of people who increase their debt after consolidation.

13thlegion

samejandwee said:

I see the clear advantage of locking them all in on 0% and then pay off but is there any logic in putting it all into one payment? Loan or money transfer etc? 

There is some logic but not much that makes a real difference. The 0% outweighs it in advantages. 

My reasoning for this response is it is unlikely for you to find a single 0% deal that will cover everything you owe right now. You are more likely to find multiples are needed to move everything or most of it to 0%. But moving to 0% is still a better option. (Check MSE credit club and do eligibility checks this won't affect anything on your credit record if you don't fully apply)

On practical side you are able to set the date that a direct debit is due. I've recently done this with a new 0% balance transfer myself, first month was set to be middle of the month so I've changed it by contacting customer services to be the same as all other bill days. So functionally all my bills comes out on the same day which is the same as having a single payment.