Help me start my debt free journey.

Mydebtfreejourney

Hello 

I'm looking for some advice to start to get debt free. My new job has doubled my current annual wage.

I have 3 credit cards with various interest rates and amounts totalling up to £13,000. Due to my previous wage I have not been able to balance transfer onto 0% cards and only been able to afford to pay minimum balance on all 3 cards meaning I haven't paid any balance down for a while. 

Do I look to balance transfer this onto 0% cards? Or take the hit and consolidate the debt into a loan?  I've checked the money saving expert club and am pre-appoved at 9.9% -13 % Apr. I have seen mixed reviews on consolidation -  I will stress that I will be using either the card or the loan to clear the debt only.

I have budgeted to also create a safety net to no longer require credit cards. So whilst paying the debt I will also be contributing to saving. 

Any help / advice would be greatly received. 

Thank you. 

 

RAS

Consolidation rarely works.

1. You replace several existing debts with varying lengths and APRs with one debt at lower APR over a longer period. Often the value of the money received is much less than the amount of money now owed.  Paying of your most expensive original debt will reduce your average APR and debt period.

2 A lot of debtors think they have "paid off the debts" rather than just transferred it to a less flexible option. They relax, absorb the "saving" into their spending and end up in twice as much debt. Unless you seriously address the reasons why you got into debt in the first place, you'll end up in the same place or worse.

A Statement of Affairs would be useful. Understand when, how and where you spent more than you earned is vital.

kimwp

In general, it's sensible to balance transfer to 0% credit cards, and pay the minimum on those while throwing as much as possible at the debts still carrying interest, but you need to weigh up how quickly you can pay the debt off. For example, if you transfer a balance to a card and pay a 3% fee, but it the interest was 6% before and you would have paid it off in five months, then you are worse off by doing the balance transfer. 

Little_bit_taller

Congrats on the new job!

Completing an SOA https://www.lemonfool.co.uk/financecalculators/soa.php is definitely the best way to get the most constructive advice and help on your situation.

EssexHebridean

The SOA is the first step because that will help you work out a  new budget which reflects your increased earnings - congratulations on that! 

Have you checked for options on 0% transfer cards through an eligibility checker like the MSE Credit Club (Free) as that will give you the best view of what you might qualify for. Although your income might have stopped you being accepted for some cards, it's not likely to be the reason why you weren't seeing eligibility as your income isn't on your credit file, so there may be something else going on in the background. 

DankVielen

Mydebtfreejourney said:

Hello 

I'm looking for some advice to start to get debt free. My new job has doubled my current annual wage.

I have 3 credit cards with various interest rates and amounts totalling up to £13,000. Due to my previous wage I have not been able to balance transfer onto 0% cards and only been able to afford to pay minimum balance on all 3 cards meaning I haven't paid any balance down for a while. 

Do I look to balance transfer this onto 0% cards? Or take the hit and consolidate the debt into a loan?  I've checked the money saving expert club and am pre-appoved at 9.9% -13 % Apr. I have seen mixed reviews on consolidation -  I will stress that I will be using either the card or the loan to clear the debt only.

I have budgeted to also create a safety net to no longer require credit cards. So whilst paying the debt I will also be contributing to saving. 

Any help / advice would be greatly received. 

Thank you. 

 

I also would advise to avoid consolidation loans.

Double the salary is quite a jump, so in theory you have a considerable amount of disposable income as long as you keep your living expenses as they were before.

You said you have not paid down the loan, you can see from the link below how much this £13k is going to cost you, but if I had this sudden income I would look to eliminate the debt as soon as possible, this will repair your credit record.

The obvious way to do it is to pay the minimum payments to the two cheapest cards and as much as you can afford toward the card with the highest interest. The link below will tell you how long that will take if you enter the balance for that card, the interest rate and the amount you can afford each month.

Then keep an eye on your credit score, if a zero percent card suddenly becomes an option take it and try to get all three onto that zero percent facility, then continue to pare down the debt so that by the time the zero percent card renews you can find another one (if you have not paid off the whole lot by then).

https://www.moneysavingexpert.com/credit-cards/minimum-repayments-credit-card.

You never know what tomorrow brings, your new job may turn into a redundancy or you might get an even better job, but eliminating the debt will be a good thing for you.