My Journey

Lady_S

Well, where do we start ...

I was in about 32k debt 6 years ago, due to many many consolidations - thank you Mr Bank, and now am in the lucky position to be half way to debt free.

I have finally paid off the last consolidation loan off, which is a lovely feeling, which now leaves me with £15 127 left to clear. Over my journey I have realised I am a new person, and don't get myself into silly situations anymore. I carefully budget throughout the year and don't overspend.

However, I am in a bit of disarray about what to do next. I have been into the dreaded bank again today and they have offered me a loan to pay off the above rubbish...but I don't want to fall into the same trap as before. I have also had a go at a snowball calculator which says I can be debt free by May 2010 if I keep my eyes on the goal. I think part of the problem is that feels so far away I almost feel like just making the minimum payments and trying to ignore it. I will post a short statement of affairs and would welcome any thoughts on it.

Incomings

1270 a month

Outgoings

Rent 120
Petrol £40 (Approx)
Insurance £22.86
Personal Grooming £25 * see note below
Loan £111.83
CC1 £45.00
CC2 £225.00
Savings £65 a month ** see note below

TOTAL 654.69

My debts

Bank Loan £111.83 a month, 29 payments to go
CC1 £1976.03, APR 16.9%, minimum payment 2.25%
CC2 £9956.03, APR 12.9%, minimum payment 2.25%

* to explain the above, the personal grooming is for haircuts I have every 6 weeks, because I have alopecia and if I don't keep my hair reasonably short I go bald. It also covers the fact I go to have my eyebrows done every three weeks because I am partially sighted and can't see to do them myself. These are two things which help me to feel better about myself, and I don't want to give them up at the moment if I am honest. The haircuts are £18 every time I go, and the eyebrows £10. I have averaged the cost out because I don't go every month.

** I am in the lucky position I don't pay for any other bills for the house, so I am responsible for keeping the cars running. Out of the £65, £45 goes towards an account for car tax, maintenance and MOT's for two cars, and the other gets split as £10 towards a holiday account for myself and my OH, and £5 each towards accounts for the childrens. Whilst the last two are an extravagance, I don't really want to give them up if I don't really have to because it gives me hope for the future. If we get any extra cash given to us throughout the year they go towards these accounts. Sounds daft as we only have £580 in one of the accounts, but it really gives me a lift on days I feel low.

So now for my plan. If I refinanced through the bank then it would take 3 years to pay off, and I would be paying £583 approx a month. But, if I snowballed and paid an extra £200 a month towards my highest debt first then I would be in a position where I am clear by May 2010. I actually explained this to the advisor in the bank today, and amazingly he said that he was really pleased to see how well I am managing myself these days and that he is sure I will be debt free before I know it. ( Made me smile, especially as they make so much money out of me at the moment).

So the question remains, am I going about this the right way? Will I ever get there, or is this just some pie eyed dream and I am about to meet a big hurdle in the road?

Thanks for listening, and sorry to go on.

teadrinker_3

I keep watching for somebody to reply to this one because I want to know the answer.

Is Lady S doing the right thing?

tyllwyd

If you can't make up your mind, why not play around with some calculators and work out how much you would pay in interest in the various options. Aprs of 16 & 12% seem quite high, so a loan at a lower interest rate mightn't be a bad idea. If you think that you will lose motivation, why not do some kind of a spreadsheet so that you can see the totals coming down each month.

Karmacat

I agree with tyllwyd - if your situation has improved, why not try some low rate credit cards? I understand that you don't have all the bills to pay, but still, a consolidation loan payment of nearly £600 a month sounds very big and very inflexible to me, circumstances can change and suddenly you're in debt again.

Do you have any extra means of income - mystery shopping etc? It can make quite a difference... as to motivation, when I get little bits of extras, I add them *all* up, including vouchers etc, so I can see one total, and when I get actual money, eg survey money, I always transfer it out of my current account to a savings account, online, so I can see it add up there and then whack it at something big time. It takes a while, but its great to see it mounting up.

angelavdavis

Hi Lady S

Congratulations on getting so far with your challenge.

I'm with the consensus here - apply for a 0% or a low life of balance card. Martin has some recommendations in today's email.

As Karmacat has suggested, try to identify an additional means of income - ebay or mystery shopping or surveys, etc.

splishsplash

Hi Lady S,
Am I right in thinking you have an extra £600+ to throw at debts presently? Over and above your current repayments? The way I see it, your income is £1270, and your outgoings (including loan/cc payments) are £659, leaving a lot of money with which to work. Let's say you decide to throw and extra £500pm at the cards...
If you could get a 0% card or two and do balance transfers, you could clear the card balances (£12k) at a rate of £500+£45+£225 = £770 pm, which would leave you cc debt free in 15months (or 16, as you'd be out of the 0% period after a year)... and your loan balance would be about £1570 by then, so you could just save that £770 for a couple of months and clear it.
By my workings, and with a couple of 0% cards, you could be debt free by September of next year!
*or am I completely off the wall here...?*

MissEyre

splishsplash wrote: »

Hi Lady S,
Am I right in thinking you have an extra £600+ to throw at debts presently? Over and above your current repayments? The way I see it, your income is £1270, and your outgoings (including loan/cc payments) are £659, leaving a lot of money with which to work. Let's say you decide to throw and extra £500pm at the cards...
If you could get a 0% card or two and do balance transfers, you could clear the card balances (£12k) at a rate of £500+£45+£225 = £770 pm, which would leave you cc debt free in 15months (or 16, as you'd be out of the 0% period after a year)... and your loan balance would be about £1570 by then, so you could just save that £770 for a couple of months and clear it.
By my workings, and with a couple of 0% cards, you could be debt free by September of next year!
*or am I completely off the wall here...?*

This looks right to me! I would definately go down the 0% route if possible, and avoid the consolidation loan-not because you might build up the debt again, because it sounds like you have a good handle on where your money is going this time-but because you can pay it off faster by snowballing, especially if you get low interest rate balance transfers.

Just a thought-why not just call your credit card companies and say to each that the other has lowered your rate, and can they match it? I did this recently and managed to knock 10% off my APR, from 17.9 to 7.9-would be worth doing if you are not confident about going for 0% cards!

Good luck, and well done for telling the bank guy you knew more than him!