Debt/loan advice needed!!!!!

alice79_2

I’m trying to pay off £18,000 in debts that I’ve built up on credit cards over a number of years- long story!! I am managing to make all my payments every month (plus extra amounts on cards with largest interest rates) and have cut back in all the areas of my spending. However I would like to pay off all my debts in one go by getting a loan. I think this would make things a lot easier, and I know that I wouldn’t be tempted to keep using the cards as I don’t want to find myself in the same position further down the line.

A friend who works in banking has told me that I should aim to get the debt off my cards as soon as possible and told me that I should get a loan. However due to my existing debts I know that I have a poor credit rating (I was turned down by Alliance & Leicester) in March. My friend suggested Freedom Finance as a possible route for getting a loan.

Here are the scenarios I can see:

1) Keep things as they are- debts on card/making minimum payments plus making extra payments on higher rate cards/trying to cut back even more if possible.
2) Applying to Freedom Finance (or A N OTHER company)now for a loan to pay off the amount, thus leaving me with just one payment a month.
3) Keep things as they are FOR NOW-(debts on card/making minimum payments plus making extra payments on higher rate cards/trying to cut back even more if possible) and then applying for a loan through the usual channels in abut 6 months (don't want to flood my credit report with failed applications!)
3) CCCS plan- I looked into this back in March. Although it seems like a really helpful plan with a clear structure, I am worried about the effect that it would have on my credit record in the future, and ability to get a mortgage etc.

I am thoroughly confused at the moment, so would appreciate some advice from any of you lovely MSEs out there!

poppyg_2

Best advice I can give is definitely NOT to go down the route of a consolidation loan, they very rarely work and you'd be paying it off over a long period of time with such a large amount of interest

Can any of your cards be swapped to 0% deals if your credit rating is ok or a low life of balance transfer card? This might help you to get the debts paid off quicker

Sammy_Girl

Hi Alice,

Welcome to the board :hello:

I think you will find that the majority on here think that debt consolidation loans are a bad idea as you may be tempted to spend on the credit cards if any crises come up.

Definitely call CCCS or Payplan, as I personally think your best bet is a DMP. It will affect your credit rating, but if you say it's poor anyway that's not too bad.

There are loads of suggestions on this board on how you can up your income and save money. Always a good idea to post your SOA with all incomings and outgoings so that the kind people on here can point out where you can dave money.

Good luck

Sammy x

GeorgeUK

Your friend may have some experience in banking, but it doesn't sound like they have much in debt management/counselling.

If you consolidate (which is very rarely advised here unless you are really struggling to make minimum payments), you would be paying off the debt for longer as most loans do not allow you to repay early without penalty and the total amount of interest you pay could be alot more than if you used other methods to get rid of the debt.

Having one payment may make things "easier" but managing your accounts will enable you to learn from past mistakes and see how to deal with them effectively.

WARNING: Under no circumstances should you get a secured loan.

I would advise checking your credit history to see if there are any late payments or defaults on it and to see how many credit checks you have had recently. You can usually have about 3 within 6 months before credit checks start to affect your credit score.

If you post up a SOA we may be able to advise of other areas you can make savings in.
http://www.makesenseofcards.com/soacalc.html

Before going for a loan i would try again for a 0% card. There may also be ways to get 0% offers on your existing cards once you clear them. Some banks offer this as an incentive for you to keep the account open. For example, Virgin money have a good 15 month 0% promotion running and still seem to be accepting new customers. There was a period where banks had reigned their lending right back, but seem to have relaxed this a little.

quantumleap

I'm sure (hope!) your friend is well intentioned but I'm afriad he/she is unlikely to find themselves working as any sort of financial advisor in the future.

Do not get a loan until such times as you have explored all of the options open to you - and to be honest I don't think you've done that.

Getting a loan means you'll be paying the debt off over a much longer period of time and paying significantly more interest and to be honest the chances of you "reoffending" on the credit cards is very likely, simply because you've done the easy thing. I know you say that'll never happen but that is what they all say (me included, at times)

Post an SOA on here and allow the people who really know what they are talking about to help you and believe me they will provide much better advise than you are currently getting.

CCCS_Sarah

You have had good advice here from the other people – don’t consolidate as this is rarely the best option as its not paying off the debt its just moving it from one place to another, plus you will end up paying more interest over all.

The other thing don’t secure the debt against your home – as long as the debt is unsecured if you do get into difficulties there is always the option of offering reduced payments, if the debt was secured and you got into difficulties this then puts the house at risk so a BIG no no!

The general rule is if you don’t have enough to meet you monthly payments and living costs then you would be looking at some type of reduced payment i.e. debt management plan (just an example as I don’t have your full details). A DMP would effect your credit rating however this is something once the debt is cleared will improve in time & there is always going to be companies out there that will still lend to you with a bad credit rating – you would just pay a higher rate of interest as you will be more of a risk.

The other thing you could look at if you have enough to meet your payments and living costs is the snowball calculator – this is a system that you input your debs and it works out the best order to clear them i.e. highest interest first. I don’t have the link for it but I’m sure someone will post it up for you.

If you have any questions you would like to ask me just give me a shout

Sarah

jackie710

Hi,

I have gone down the consolidation loan route in the past - the bank I was with at the time advised me on this!!
From my past experience things happen and I needed money to pay off things and gradually over time I accumulated more debt on cards.
And now you can see rather than 12K in debt I am now 27K in debt!
If you can some how either through the CCCS or other ways, get rid of your debt and all the help and support from the forum keeps you motivated and positive to stick at it. They are always here day or night.

All the advise so far has been brilliant and I totally agree -

Good Luck with it all -

I have now gone for a DMP with CCCS to sort out all my debts. Best thing I have done. Although my credit rating will be bad over the next few years I can build it back up.

All the very best

alice79_2

alice79 wrote: »

I’m trying to pay off £18,000 in debts that I’ve built up on credit cards over a number of years- long story!! I am managing to make all my payments every month (plus extra amounts on cards with largest interest rates) and have cut back in all the areas of my spending. However I would like to pay off all my debts in one go by getting a loan. I think this would make things a lot easier, and I know that I wouldn’t be tempted to keep using the cards as I don’t want to find myself in the same position further down the line.

A friend who works in banking has told me that I should aim to get the debt off my cards as soon as possible and told me that I should get a loan. However due to my existing debts I know that I have a poor credit rating (I was turned down by Alliance & Leicester) in March. My friend suggested Freedom Finance as a possible route for getting a loan.

Here are the scenarios I can see:

1) Keep things as they are- debts on card/making minimum payments plus making extra payments on higher rate cards/trying to cut back even more if possible.
2) Applying to Freedom Finance (or A N OTHER company)now for a loan to pay off the amount, thus leaving me with just one payment a month.
3) Keep things as they are FOR NOW-(debts on card/making minimum payments plus making extra payments on higher rate cards/trying to cut back even more if possible) and then applying for a loan through the usual channels in abut 6 months (don't want to flood my credit report with failed applications!)
3) CCCS plan- I looked into this back in March. Although it seems like a really helpful plan with a clear structure, I am worried about the effect that it would have on my credit record in the future, and ability to get a mortgage etc.

I am thoroughly confused at the moment, so would appreciate some advice from any of you lovely MSEs out there!

Here's my SOA- all advice gratefully received!!

GeorgeUK

where?
or are the debts really sooooooo small i can't see them?

Edit: Thanks Suzy - wasn't trying to be a smartass (well, not too much). I thought is was a mispaste rather than saying the first post outlined the situation

SuzySu

Hi Alice

An SOA is a detailed list of all your incomings and expenditure - you can find out how to do yours at www.makesenseofcards.com and click on the Statement of Affairs link.

You'll need all your paperwork handy with the relevant APRs, but it's definitely worth doing.

alice79_2

Statement of Affairs and Personal Balance Sheet

Monthly Income Details
Monthly income after tax................ 1011
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 1011

Monthly Expense Details
Mortgage................................ 0
Secured loan repayments................. 0
Rent.................................... 300
Management charge (leasehold flat)...... 0
Council tax............................. 70
Electricity............................. 30
Gas..................................... 10
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 10
Mobile phone............................ 35
TV Licence.............................. 11
Satellite/Cable TV...................... 10
Internet Services....................... 0
Groceries etc. ......................... 50
Clothing................................ 10
Petrol/diesel........................... 20
Road tax................................ 11
Car Insurance........................... 0
Car maintenance (including MOT)......... 15
Car parking............................. 20
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 10
Haircuts................................ 10
Entertainment........................... 15
Holiday................................. 0
Emergency fund.......................... 0
Socialising............................. 20
Gym membership.......................... 30
Total monthly expenses.................. 687

Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 100
Other assets............................ 0
Total Assets............................ 100

No Secured Debt

Unsecured Debts
Description....................Debt......Monthly...APR
egg............................1000......30........17.9
mint...........................3456......80........15.9
&more..........................2335......75........19.9
hsbc...........................1500......50........17.9
halifax........................4456......100.......12.9
abbey..........................5473......95........14.9
Total unsecured debts..........18220.....430.......-

Monthly Budget Summary
Total monthly income.................... 1,011
Expenses (including secured debts)....... 687
Available for debt repayments........... 324
Monthly UNsecured debt repayments....... 430
Surplus(deficit if negative)............ -106

Personal Balance Sheet Summary
Total assets (things you own)........... 100
Total Secured debt...................... -0
Total Unsecured debt.................... -18,220
Personal net worth...................... -18,120

Created using the SOA calculator at www.makesenseofcards.com.
Reproduced on Moneysavingexpert with permission.

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