Credit Cards and pay off early - advice needed if possible

britoonz

Hi there,

I am looking for some advice and I believe this is the best place to ask.

Monthly income of £2715.00

Currently I have two large credit cards.

One for £5850.00 & £3089.00

I am paying roughly just over £200 P/M per card.

I have been considering my options today. One being taking out a consolidation load for £8000 paying back £126.00 P/M for 7 years and the other is borrowing from my house to clear everything off.

I am not sure what to do and want to be able to clear off these two credit card payments plus additional direct debits. to allow me to have more money left over after I pay my mortgage and bills.

In total for paying the credit cards and additional direct debits tally up to £2388.00 (fridge freezer, garden furniture) these direct debits are around £108 / £70

Many thanks

:)

Isthisforreal99

Consolidation rarely works and people end up even worse off by building even more debt by using the credit cards again. Don't even consider securing your debt against your home.

Seems bonkers to me to take out a 7 year loan. Are you paying interest on the cards? What rates?

britoonz

Hi thank you for your reply.

Credit Card 118 = interest rate of 41.2% £200.87

Credit Card MBNA = 24.94% £211.98 P/M

Both are very high rates from what I can see from the statements.

I was very hesitant regards to the Consolidation loan.

Isthisforreal99

And is that the minimum payments?

britoonz

Yeah they are the minimum payments for both.

sourcrates

Both ideas are horrendous, a consolidation loan, if you can get one, only benefits the bank lending you the money, tons of interest will be payable, the figures you quote will only apply to 51% of applicants, you may not be offered the same rate, and seven years is a long time, I`m sure other financial issues will arise during that period, what do you do then?

Most people revert back to the credit cards, and run up further debt, we refer too it as "the debt spiral" we see a lot of that.

Equally bad is turning unsecured debt into secured, can`t pay your credit cards, worst that can realistically happen is payment arrangement, can`t pay your mortgage, you could lose the house, why would you risk that for credit card debt that is non essential?

Have you considered the much more sensible choice of debt management?

You repay what you owe, at an affordable rate, over a longer time frame, usually all interest gets stopped as well, no risk to anything but your credit file, which should not be your top priority when you are in unaffordable debt anyway.

Please do not consider borrowing more money, debt management would see you paying roughly £150 a month for 5 years, with no interest.

ManyWays

Can I ask what may sound like an irrelevant question? What is your current mortgage rate and when does your fix end?

Also can you get a 0% balance transfer to clear that very expensive 118 card?

MEM62

……and the other is borrowing from my house to clear everything off.

Default on unsecured borrowing and you will get letters and maybe a CCJ. Default on borrowing against your house and your home is at risk.

A better understanding of how money works would serve you well.

tigergambit

Hi @britoonz,

consolidation loans or making unsecured debt into secured debt are both bad ideas.

I you can get a balance transfer you will free some cash to pay down other debts more quickly. As you pay off each debt you can snowball that payment into paying off others.

Before doing anything you should be considering how you have managed to tie up so much of your income into monthly payments. The implication that you'd like a consolidation loan to allow you to spend more should be setting alarms off.

horsewithnoname

https://forums.moneysavingexpert.com/discussion/6682343/credit-cards-and-pay-off-early-advice-needed-if-possible

if you borrow money to clear your credit card, you are not paying it off, just transferring the debt to somewhere else.

Windofchange

Those interest rates are insane! As someone above said can you not get them transferred onto a 0% for x amount of months offer? Doing that and keeping your monthly payments the same would rattle down the amount owed significantly over a 12 month period.

As others have said you should absolutely under no circumstances do either of add it to your mortgage or take a consolidation loan. I’ve been there and got the t-shirt with the consolidation loans and all that happened was I ended up with a loan and the credit card debt back as it felt mentally like I’d paid it all off so started spending again. Don’t do it. If you can’t get 0% deals and your interest rates are like that I’m assuming you are a risky option for the banks. You will 99% just run up the debt again.

Can you increase your income at all? Weekend work in a pub or whatever? An extra few hundred quid a month chucked onto the cards will make a big dent. Anything you can sell? These are the two options I have taken on my debt free journey. I’ve now only got a few grand to go from a lump of debt that was many tens of thousands. For me it was initially extra hours at work but a few promotions later I’ll likely be done with the last few grand by Xmas. Infact, I could clear it all many times over tomorrow as I’ve been investing alongside but no rush as all on 0%. Also, how do you cut your outgoings? Subscriptions, food, whatever. Can you live like a monk for a few months? Another thing I’ve done in the past is on payday take out £100 in cash and that’s my monthly food shop. Yup, was properly fed up with beans on toast and pasta but I was more fed up with losing grands a year in interest to the banks.