Stuck with high interest charges

sourcrates

ljemann said:

I would like to point out that we are only looking at loans because of the high amount of interest we are both being charged by the credit cards. 

I don’t know how comfortable I would be just stopping paying 😳

Thank you for all the comments though. 

Then don`t pay it, just because you are charged it, doesn`t mean you have to pay it, not all of it anyway.

That`s essentially what a debt solution is, when your existing debt becomes too much to deal with, you stop paying it, you re-arrange the terms of your borrowing, by defaulting, interest is then stopped altogether, and you repay the balance, interest free at an affordable rate.

Much further down the line your debts will be sold, and the companies that buy them will offer you settlement discounts, which will way offset any interest paid before your debts default.

Its the basis to every debt solution going, if you can`t afford it, you stop paying it, its the banks and the credit reference agencies that have brain washed consumers into thinking you must repay what you have signed up to, well actually you don`t have to do that, you can go your own way, and there`s nothing they can do about it.

At the moment you are being controlled by convention, and are trapped in the credit spiral, following their rules, and you can`t see a way out of it, you need to flip this on its head, and start looking at it from a different angle, we can help you do that, but first I suggest you read up as much as you can about defaulting and debt management, then you too will know how to play the game to your best advantage.

enthusiasticsaver

If you are having to use credit to live, only paying minimums and unable to get decent interest rates then I think a debt management programme is probably the way to go.  If you do an soa (a link is in my signature) we can advise further.  I understand defaulting is scary but once you have stopped the debt spiral it usually is the best for most people.  It will not affect your home or your mortgage as you can still move to deals with the same lender but it will affect your credit file for 6 years meaning no more borrowing.  That is usually the best way to go anyway though.  Debt consolidation by taking out loans is not the best way of dealing with credit card debt. 

Rob5342

I was in a similar situation, I kept getting new cards to transfer balances to, sometimes with 0% deals that would later expire and then later on payday loans to make minimum payments. I kept convincing myself I had a way out but all. I was doing was making things worse and worse. I eventually started a dmp and it was only then that things got better.

Stopping paying can seem scary when you have got into the mindset that you must make the minimum payments but it really isn't. After a while debts will default so all interest will be stopped and after that you can just repay them at whatever rate is affordable to you. At some point they will get sold to debt collectors who will be open to settling them at a reduced rate. Defaults will affect your credit record, but if you are already in so much debt that credit applications are being turned down then that won't make much practical difference. Defaults drop off after 6 years so you will have a clear end in sight, like you mentioned you would if you got a loan. 

Looking back to when I was in your situation I just wish that I had started the whole process earlier. 

ljemann

Do I need to default before coming to a debt management plan/arrangement?

ManyWays

Many lenders do not make it easy to come to a payment arrangement until you have missed some payments. 
You can set up a DMP through Stepchange or other firms before you have missed any payments. 

You may not feel comfortable stopping paying, but consolidating at a high interest rate will leave you in more of a mess after a few months, it is not a solution.

tigergambit

ljemann said:

Do I need to default before coming to a debt management plan/arrangement?

Yes. There is no advantage to you not to do so as interest and charges could still be applied if you don't get a default.

I completely understand your concern over stopping payments. I felt the same - it's not easy th go against a lifetime of social training. But when you do and you discover that the sky does not fall in and, in fact, nothing happens for months it is unbelievably liberating.

This is a new game with new rules. You need to work on a new mindset - it will come.

Rob5342

ljemann said:

Do I need to default before coming to a debt management plan/arrangement?

You don't have to but it's vastly better for you in the long run if you do. If you default then all interest gets stopped, and the default will drop off your credit record after 6 years so you have a clearly defined time when your credit record will be clear. If you talk to your lenders they will try and "help" you and put you on an arrangement to pay. Arrangements to pay stay on your credit report for 6 years after the debt is paid off so your credit report could potentially be harmed for 11+ years instead of only 6. The other huge advantage of defaulting is that your debt will get sold to a debt collector who will be open to settlement offers, so you could potentially clear the debt for much less, maybe 50% of its value.

It's completely counter intuitive that talking to your creditors means you will get treated far worse than if you just ignore them, but that's how the system is. 

RAS

Defaulting help:

Creditors stop charging fees and interest, much more effective than a loan
Means your credit record improves in 6 years, rather than sometime, never.
Ensures you have spare money every month, to save into your emergency fund, so you don't get caught short when the SHTF. 

And your stress levels reduce, rapidly because you are no longer fighting fires which flare up all the time.

ljemann

Thank you all. Another question I’m afraid, when going through a DMP is it best to include all debts, or can you still keep paying some? I’ve got a personal loan that only has 7 months left on it. 

Grumpelstiltskin

If you are  waiting for your debts to default it will take some months before you are ready to start your DMP, so if you are happy to pay the loan before your DMP starts then it is up to you..

The waiting for defaults and not paying is so you can use the money you would have paid to your debts to build up an emergency fund so you don't need credit when something goes wrong.