Funny debt advice

Harvs98

Hi, being a fan of the MSE site - I now try my best to make my money work for me and am always looking for ways to reduce my debts.

Whilst reading the Metro newspaper on my way to work this morning, I read an article titled 'avoid the debt crunch'. It seemed like good advice until I reached a section called 'restructure your debt'. After learning what I know from this site, it made want to burst out laughing. The exact wording is below:

"Much short term debt has high rates of interest which make it difficult to clear. Once introductory interest rates end on credit cards, it can be quite a shock to face rates of 15%. *(here is the funny part)* AT THIS POINT TAKING OUT A LOAN OR REMORTGAGING MAY BE THE ANSWER"

I immediately thought why not recommend becoming a rate tart and paying off debts at 0%? Or better yet, visiting the MSE site?

What do you all think of this advice?

smartsaver

Who sponsered or initiated the article? Sounds like a bank or Building Society to me. To be fair they are not going to recomend becoming a rate tart - it's the 'What's in it for me' syndrome and quite frankly nothing is the answer. :rotfl: They rely on people staying after the deal has expired - thats when they recoup their money lent at 0%.

We are exploiting a loop hole. I still believe rate tarts are still the minority and that is the reason 0% deals still exist. Most can't be bothered are not organised enough to change again once the deal runs out.

For some a loan or remortgage may be the anwser and is not 'bad' advice per se. A loan interst rate is almost always lower than a credit card - as long as it is not secured to your house is sometimes a ok deal for some.

If anyone is really interested in sorting out their finances, Martin is quite high profile on TV and radio plus the national press. :beer:

Milarky

Personal loans may have repayment penalties however. Life of balance offers from credit card co.s may be a better option because of the ability to repay without penalty. Then if 0% deals come along from somwhere else it is possible combine advantages by [for instance] borrowing about as much as you can afford to repay on the 'principal' loan above minimum payments [typically set at 2%]

For this to work however you'd need to be able to afford to pay 4%-5% of the debt monthly.

For example if you have £5,000 borrowed at 5.94% [that's 0.495% per month] you'd have to pay £24.75 interest in the first month - £100.50 min payment

Example: I've just worked out that if you could afford to repay £240 per month [that's 4.8 percent of the 'principal'] and put just over £1050 on a 0% card for 9 months, pay just the minimum amounts to both cards and put the balance from £240 into an ING account, then you could repay the 0% after 9 months from the savings built up and would have a net 'gain' of about £50 less owed at the end than otherwise. [This can also be equated to having reduced the life of balance rate from 5.94% to 4.26% during this period]