credit card debt management

priceey

Hi,

I am trying to find out what would be the best steps to start clearing some debts.

Here is how it stands at the moment:

CC	4260	interest
	8260	interest free
	6710	interest
	2400	interest
loan	2626
overdraft	1130

I have managed to shift 8260 onto an interest only card but i am reluctant to apply for another interest free card as the last one i applied for only gave me £460.

What would be the best debt to start chipping away at? 

looking at the loan there are around 13 remaining payments - obvs things will be easier when that ends, but i am trying to decide what is best in the short term.

Emmia

Could you post up the relevant interest rates?

You seem to have around £25k in debt overall. How much spare cash do you have to throw at these debts?

It would help if you do a statement of affairs,  as this could identify areas that you can economise on, to help pay the debts down faster.

https://www.lemonfool.co.uk/financecalculators/soa.php

Fill it in as accurately as possible, format for MSE  and post it up.

Smudgeismydog

Generally there are two methods;

Snowball - tackle your smallest debts first, get them paid off and progress through to your larger debts. This builds momentum, and often people feel motivated quickly as the number of creditors reduces. 

Avalanche - tackle your highest interest rate first, to reduce the overall interest paid. This approach costs less in the long run, but can sometimes feel like you are making slower progress.

As @Emmia noted, if you can share more detail, ideally an SOA, then we can provide more personalised guidance.

ManyWays

I take the practical view that if all the card interest rates are similar, go for the smallest; but if any are a lot higher go for that one first. 

priceey

Looking at one card now it still says i have a minimum payment coming up of 550, as this was based on last months balance. 

I have transferred debit from this card to another but it doesn't look like that gets taken into consideration so i am worried i will be looking at 2 card bills in December which i'm not sure i'll be able to cover.

As for how much is left over each month, not a great deal is the answer to that. 

i have been chipping away slowly at the overdraft and the smaller card but obvs it takes time

priceey

As for interest rates on the debits

CC: 
£4260 = 25.9%
£6710 = 29.9%
£2400 = 25.6%

overdraft:
1130 = 39.9%

MEM62

How big is your shovel?  

CliveOfIndia

An SOA would be really useful here - purely to see what your options are.  Can you realistically get these debts paid off within a reasonable time-frame, if you cut down on other expenditure?  Or is defaulting a more realistic option?  Without knowing details of your income and expenses, it's very difficult to give any meaningful advice.

priceey said:

Looking at one card now it still says i have a minimum payment coming up of 550, as this was based on last months balance. 

I have transferred debit from this card to another 

If you transferred the whole balance after this minimum figure was calculated but before the next statement, you should be fine on that count - nothing further to pay.

priceey said:

As for interest rates on the debits

CC: 
£4260 = 25.9%
£6710 = 29.9%
£2400 = 25.6%

overdraft:
1130 = 39.9%

On that basis, the Overdraft needs to be your priority.  Not only is it the highest APR, but a bank is at liberty to withdraw your OD facility at any time and demand immediate repayment.  I'm not sure how often this actually happens in practice, but it is a possibility.

In terms of cold hard cash, always focus your efforts on the highest APR.  But there is undoubtedly a psychological "feel-good" effect if you tackle the lowest balance first - when one debt is wiped out, it can give you the impetus to tackle the others.

But really, an SOA will be very helpful.

ManyWays

how much are you charged for the overdraft a month? 

enthusiasticsaver

I would say initially the overdraft should be your priority given it is charging 40% interest. 

You only have two options really.  Either you keep chipping away at the debt and hope that as it reduces you get accepted for interest free cards or you default and eventually that will stop the interest and your monthly payment will be affordable if you go for a DMP but your credit record will be negatively affected for 6 years. 

priceey

ManyWays said:

how much are you charged for the overdraft a month? 

i think by the end of the month its about £1 a day.

I don't like the sound of defaulting :-(