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Advice for my mum please

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Hi, this is my first post, so any advice would be welcomed.

My mum currently has debts of approximately £50000 on credit cards. She owns her own business which is two years old, and just beginning to tick over financially. There were a lot of outgoings to get the business up and running, and her bank balance, and that of her husband's, have had to take the strain of this.

My mum also has her normal job, which pays the mortgage, and pretty much all of the bills at the moment, but she has reached the point where her head is only just above water, and checks her bank account to see if there is enough money to pay the mortgage each month etc.

She has made an appointment with her bank manager, who is usually full of good advice for her (no, it wasn't his idea to get so many credit cards!) but this isn't for about three weeks.

I'd like to help her out, and was wondering what the best way to go about this would be. Until the last couple of months, I would say that her credit rating would be deemed very good or excellent, but I believe she has missed one or two payments recently due to incorrectly set-up directs debits and not paying on time.

Would it be a good option to transfer onto other credit cards, to get a 0% deal or two, or would the best option be to get a loan for the amount, cut up the cards etc. She also has the option to increase her mortgage, but obviously this would extend the repayment period of the loan.

Any help gratefully received, thanks in advance. :D

Comments

  • James240
    James240 Posts: 16,391 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Hiya £50,000 on credit cards seems an awful lot, can yuor mum apply for other credit cards with big credit limits? Im not an expert but what i would do is to post ur mums incomings and outgoings and then People in the forum might be able to look at something different for ur mum. Although iof she can get 0% then it might give her some help.

    Sorry i cant help any more but if u post her ooutgoings every month then the guys on here might be able to suggest something.

    Hope every thing works out

    james
    Savings Total so far for 2023: £8,062.58
  • stustu92
    stustu92 Posts: 92 Forumite
    Hi Struggling,

    The first thing that i'd say to do is to post the amounts owing to who on here and more importantly remember to put the APR of the cards on as well.
    A good strategy can't really be formulated until these details are known.

    Are all of the cards your mums personal cards or are any for business use?

    Does your mum currently only pay the minimum payment?

    Speaking generally, getting a loan to pay off credit cards can be the start of a downward spiral unless the person is very well disciplined. Once a loan gets set up and disposable income increases, the cards can be tempting once again. Take it from me, its not a good idea to get into the cycle of getting loans to pay off CCs.

    stustu92
    I like to save the money...
  • Thanks for replying James and Stustu, I will speak to her this week and see what her in and outs are. Most of her outs are credit card minimum repayments and house related bills (mortgage, elec, water, gas, phone etc), with petrol, food and other bits making up the rest.

    Her incomings from her job are quite good, in the region of £500 a week. The business is making more than it did last year, but it is seasonal, and isn't making enough at the moment to cover the down-time in the winter months.

    If my mum can get additional credit card(s) with a 0% balance transfer it could help her out, as long as she was able to maintain her payments. I would get hold of her other credit cards so she couldn't spend again on them, exacerbating the problem.

    Any other thoughts?
  • mountainofdebt
    mountainofdebt Posts: 7,795 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    Personally if your mum is able to transfer any debts to a credit card with 0% then I would CANCEL the old cards....write the letter, get your mum to sign the letter and then post it for her if you feel that she might be 'tempted' not to do so herself.

    The other thing that occurs to me is that I believe your mum should work out what debts are attributable to the business and then make sure it is recorded in the company books as a debt owed to your mum (bearing in mind that interest will also be payable to your mum from the company). Then, when the company is able to pay your mum back it can do so and your mum will be able to withdraw this money from the company as a repayment of a loan rather than as a salary which would attract all the usual deductions.......her accountant should be able to confrm this is accurate.
    2014 Target;
    To overpay CC by £1,000.
    Overpayment to date : £310

    2nd Purse Challenge:
    £15.88 saved to date
  • stustu92
    stustu92 Posts: 92 Forumite
    Hi Struggling,

    The ideal situation would be to turn your mum into a credit card tart, getting 0% cards and doing B/Ts every time the offers end. However the fact that she has had a couple of late payments recently may have already put 0% cards beyond her reach. I'm no expert on credit scoring, you'd just have to apply and hope it goes through. If she does get a 0% and does a B/T then definately cancel the old card. Having too much available credit could negatively affect her credit rating.

    You also need to explain to your mum the implications of only paying the minimum payment. If you were to graph the paying off of a credit card with the minimum payment the curve would be exponential decay. This means that a lot of time elapses for not a lot of money paid off.
    This is because the minimum payment is a percentage of the outstanding balance. Hence for example 3% of £1000 is £30, next month 3% of £970 is £29.10 So you may see that as the balance decreases so do the minimum payments.
    Credit card companies rely on people only paying back the minimum repayment, in fact this type of customer is the most profitable for them.

    You really need to get your mum to understand this. If you have any more questions please post back.
    I like to save the money...
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