Debt repayment options

pink*fairy_3

Hello,

I'd appreciate your advice.

Debt:
I have credit card debt totalling £35k - most on 0% rates which I juggle and maintain by paying the minimum. Balance transfer deals are not guaranteed in the year ahead and I have £6k on 22%, and further 0% offers ending June and July 2025 totalling £15k. Remaining is on 0% card until 2026.
I am currently out of work and may not be eligible for UC (currently waiting for confirmation)

Goals:
I am single with no dependents.
My mortgage is fully covered by a lodger, so I want to focus on working hard and living simply to get debt free in the next 2-3yrs. I'm currently out of work and jobhunting very hard. My plan is to pay off £1k minimum up to £2k maximum a month once I find work.

Current situation, debt plan and options:
I am out of work and have enough to cover my minimum card payments for the next month. I have had 4 final interviews this week and feel hopeful I can start work in Feb/ Mar. I may not be eligible for UC as I have a LISA totalling £16k (3yrs of payments + interest).
- Should I withdraw/ close my LISA and lose the 25% bonus? I would get £4k minimum - £12k maximum. This may cost less than maintaining interest charges long term. How much should I withdraw? If I get debt free, could I continue paying into it for a few years or is a Stocks & Shares ISA more profitable?
- Remortgage options. I have a 5.2% fixed rate until Oct 28, equity on house is worth £50k and I would like to sell and downsize in 2028.
- Debt consolidation loan - would this only work if I'm in employment?
- Debt payment approach - avalanche method and switching to 0% at earliest opportunity. Monitoring dates for end of 0%. High priority debt = aim to clear £6k with LISA funds and aim to clear £15k 0% ends in summer with remaining £6k and income.
- Any other options I have not covered/ other reasonable options?

Many thanks in advance

Brie

If you feel you must pay any credit card bills stick to the ones on 0% for now to keep that rate.  Anything above that stop paying immediately.  Ring them up and tell them there's a glitch in your financial situation that you hope to fix soon and that you hope to be back to paying them in, say, 3 months.  Ask that they not charge interest in the meantime while you get proper debt advice.  This will of course be noted on your credit history and may affect you getting more 0% offers in the next year or so.

Debt consolidation loan.  NO.  Mostly because it's not a good idea as it doesn't really solve the problem.  And also you'll be unlikely to get one.  What applying for one is doing is you asking a bank to give you more credit to cover the credit you already can't afford.  So you have £35k debts now.  And say you apply to get a loan for £15k to cover some of the cards.  What you are asking the bank to do is to trust you to be able to afford £50k worth of debt.  You might tell them you'll use the money to clear a couple of cards but you might just use it to book a nice cruise instead.  That you would need to mention that you are currently without an income won't help.

Can't comment on the LISA as not in my knowledge range.  

Too early to remortgage in my opinion and not a good time to sell if your mortgage is covered in any case.

Why not go to the top sticky and find the SOA (statement of accounts), fill that out and pasted it in here.  Lots of advice will be available about what might be trimmed from your budget to get you through the next couple of months until that next pay comes along.  Don't worry - we're a fairly nice crowd and don't bite.  

Also - have a look for your local food resources - there are food banks but also lots of community fridges and Olio where people help stop food waste - it's a great way to make your ££ stretch a bit further.  Don't be fussed about taking resources when you need them - you can always pay back into them when you are flush in a year or two!!

EssexHebridean

Debt consolidation loans generally don't work at all - so best to set that idea aside at the moment in favour of other approaches. 

If you are not earning then you probably shouldn't be paying anything to unsecured debts while you have no income - however this is always a tricky one where 0% cards are involved as missed payments will lose you that promotional deal - probably the same with any "low rate for life of balance" type deals.

Can you get any form of work even as a short term filler to keep the payments going until you get something permanent?

The situation with LISAs is a nuisance - technically you can't withdraw that money without making a loss on it, but it still counts as savings of course. Frustrating. If you think you are going to find work pretty soon, I would say try not to withdraw it if possible. Remember - you don't just lose the bonus - you lose some of the money you have put in, too, if you withdraw other than to buy a qualifying property or for retirement.

If you are adding the remortgage in there as an option for paying down debt, that should be considered to be not a good idea at all. Generally speaking, altering standard unsecured consumer debt where the worst that happens if you don't pay it off is that you get some letters, maybe some phone calls, to secured debt where the worst that can happen if you can't pay is that you lose your home is considered sub-optimal!