# Advice on using a loan to get rid of credit card debt



## Rick_1138 (Jan 24, 2008)

Hi all,

I am looking for some views or recommendations about what i should do in my present situation.

I have accumulated some debt over the last few years, nothing major, about 7k.

i had got this down to about 4K, on a 0% balance credit card and was getting rid of it well, however there was an emergency last year and an unexpected trip that i had to pay for which added about 2.5K to my emergency credit card.

As a result i now have about 6.5k debt, all 0% but it means i am paying about £800 a month to get rid of it all before the 0% deals run out in October time.

I can afford these payments but it is the comfortable maximum i can afford after all payments and bills are squared a month, and tbh its going to become a problem if another emergency comes up as i was starting to develop my savings but it wiped it out last year and i am now paying off debt and having nothing to show for it.

My main thought was to take out a loan over 2 years for 6.5k, which would be about £280 a month for 24 months, which would get rid of all my debt (i have no other major outgoings a month bar this credit card and general bills, and a small loan that ends in 8 months i got when i was leaving uni)

This way, i am paying a lot less a month, not straining myslef, and getting rid of my debts in about the same kind of time frame, as i have things to pay for this year that will strain my ability to get rid of the credit card debt without starting to incur biggish interest hits.

I am basically curious if others have taken a loan to cover credit card debts, and if it worked out\didn't etc.

This way i can cut up my cards, have my main emergency card that has a small limit on it, and start putting cash away in savings, build up pension scheme etc etc. as just now i feel i am shoveling like mad just to stay at the same point in the pit.

yes its swapping one debt for another, but isn't it all about managing and what your comfortable with.

Any advice\experience welcome.

Thanks all

Rick


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## mba (Jun 17, 2006)

You will better going to see a lender in person, they will weigh up the facts and determine if you are a "safe bet" for the loan. 

Not being an advisor myself i think they will look at your current situation of paying £800 a month and see that you are able to pay debt off and count that as a positive when you ask for the £££

Just my opinion


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## buckas (Jun 13, 2008)

Would getting another 0% balance transfer card (with 2.9% fees) be cheaper long term than a loan - as nowadays loan rates are rubbish, and for a (small) amount like £6.5k would be looking around 15% iirc

http://uk.virginmoney.com/virgin/credit-cards-v3/index.jsp

16 months and just do it again somewhere else at the end

or iirc there's 4.9% for the life of the balance knocking about - or there was?

http://uk.creditcards.com/balance-transfer.php


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## PaulN (Jan 17, 2008)

Hi,

How about knocking your monthly payments down a bit while under the interest free period then taking another look in October?

Maybe pay £400-500 per month remember its interest free then either go for another interest free period or look at a loan then.

A loan is an option but get your money out of the interest free period first.

Cheers

PaulN


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## Rick_1138 (Jan 24, 2008)

I wouldn't even know where to start to find a lender, and don't they charge heaps for advice.

The only place i would go would be the bamk, but nowadays, all decisions are made in Edinburgh, so you are aswell just doing it online.

I have never been declined a loan or credit card, and i have never missed a payment, but its a second loan (granted the other is small and lamost finished) and i would be worried about being declined and that having a bad effect on what i believe is a good rate of credit.

My current card are (barclaycard £0 on it)

Virgin 0% until December with £2877

Egg with 0% until October with £4512.

Virgin had nothing on it and hadn't been used in 3 months but they offered 10 month 0% transfer again so i swapped my barclaycard balance so i am interest free now on all payments.

The main issue is i am going to the isle of man in June, but the guest house bill is £900 (bloody thieves during tt week!) and they want it paid by April 1st (the plan was to save up a couple of hundred a month and pay it in cash in June, but they e-mailed confirming that room was ready and payment was needed by april 1st, the guy did mention this but the room was booked in July last year and i got mixed upo with the ferry and hotel. anyway, my GF needs leather jacket for the bike, so another £250 in March and it basically means i am paying a lot of cash this month and next and some of it will ahev to go on the credit card, which means about 2 months payments will come to nothing.

I could try for a new 0% transfer in August\September, see what i have left to pay and chuck it all on that if i get it and basically budget £600 a month to pay it all off within the 0% period.

That way i am only paying off what i owe and not interest, i just worry that i get caught out by some unforseen circumstance and have to add yet more debt, where as with the loan, i would have cash to set aside incase of emergencies\wanting to buy something more a bit more expensive than usual etc.

Just a bit worried that i have had 2 0% cards given to me, what with the recession now, just incase credit card companies dont want to give me another card etc.


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## Troon (Dec 17, 2008)

Rick_1138 said:


> The main issue is i am going to the isle of man in June, but the guest house bill is £900 (bloody thieves during tt week!) and they want it paid by April 1st (the plan was to save up a couple of hundred a month and pay it in cash in June, but they e-mailed confirming that room was ready and payment was needed by april 1st, the guy did mention this but the room was booked in July last year and i got mixed upo with the ferry and hotel. anyway, my GF needs leather jacket for the bike, so another £250 in March and it basically means i am paying a lot of cash this month and next and some of it will ahev to go on the credit card, which means about 2 months payments will come to nothing.


This may seem like shocking advice, but if the IoM trip isn't *truly* essential, don't go. You can't afford to. Get a secondhand jacket for the GF. If she doesn't understand, then she also needs to learn about frugality.

Seriously - you're living beyond your means at the moment. Re-arranging debts is only part of the answer, and may encourage you to get further into debt.

Scrimp, save and go without until you're debt-free, then don't do anything that brings you back into debt.

These emergency trips and expenditure - were they _really_ necessary? (You don't need to answer this here for my benefit, it's for yours).

Good luck. It's a steep and sometimes painful slope out as you adjust to the realization that what you can actually afford is less than you thought, but it's worth it in the end. :thumb:


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## PaulN (Jan 17, 2008)

Dont buy or use your 0% credit cards!!!! They will give you a few months 0% interest but after hit the whole amount on the card at the full interest.

Pay £500 a month and bank the £300 just in case. The money is in your bank and having a few quid makes you feel better.

If you pay your monthly amounts on time and have 2-3 cards theres no reason why you cant get another card in december.

Your in a better position than most as you understand it all needs paying sometime!!!

Cheers

PaulN


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## Rick_1138 (Jan 24, 2008)

TBF Troon, you are right in what you say, but i am not struggling as in can't afford to eat or anything silly, if i needed to i could happily add £150 to my repayments a month if i wanted to, the money i pay into the credit card is what i am comfortable with.

The TT bill i can afford to pay, i just didn't want to HABE to pay it in a oner, but its not a major issue. As for the mrs jacket, we are going to the motorcycle show to get a good jacket from last year on sale, i did this with my leather 2 years ago and it saved me £300!

The way i wrote the last bit came across as if i was struggling, i am not.

What i was worried about is my 0% rates end in October and i was worried i may get a black mark against my credit if i applied for a new 0% card to transfer any balance left over, although i found out that this isn't the case.

My main thoughts were what is better, £750 a month over 10 months and pay back just what i am due, or £250 a month over 24 months and pay a bit extra in the long run but it means i don't need any credit cards anymore.

Also the trips awau unfortunately were necessary, family grievance and having to stay in central london travelodge for 5 days! and th other emergency payment was replacing a 4' by 5' double glazed window after some idiot hit a golfball through it after practicing in his garden next door....£1200 for the glass and fitting.....gah.

as this was at the start of winter i couldn't leave a gaping 5' hole in my livingroom.#


As i say i can make the payments comfortably, more if i needed, the TT trip is budgeted etc, i just wasn't sure about putting whatever is left of debt onto a final 0% card if it was declined or something unlikely, if that had bad repurcussions, i have found this isn't the case.

As a result i am not needing a loan. I also never use my credit card now unless its an emergency, i havent used one in about 3 months now apart fromthe odd petrol at the end of the month or something small.

i was just looking at another option.


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## A210 AMG (Nov 8, 2008)

If it helps Barclaycard offer a 6.9% for the life of the balance with a 2.5% balance transfer rate.


With regard your personal situation, 7K sounds alot more than a few nights in a hotel / window. Also was the window not covered? by yours or neighbours insurance?. Buying new jacket and going on the TT trip does seem a little bit unneccesary? Its over £1000 you could pay off in one lump? but that's me moaning.....sorry


Have a look on Money Saving Expert (Martin Lawrance) all sorts of best deals for this and that / rates / card swapping etc etc

Just also be carful the 0% doesn't run out and you get stung at the full APR.


Sounds like you know what your doing so will have it all sorted soon, then a new bike


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## Rick_1138 (Jan 24, 2008)

The 7k was over a period of about 3 years, the stupidity of being in a new job, having cash to spend and then going, "oohh shiny, i will get it this month on c-card" idiot mentality.

I know the reasons for why i have debt, as i say i was getting through it fine, it was the extra 2k from various things from emergencies to odd bits and bobs.


The point is, i don't spend hardly anything now other than what i need, petrol, food, the odd dvd. I have learned my financial lessons, i just now have to sort them lol.

The TT is my only holiday this year, and as i have said i can afford this, i was mainly looking for advice\opinon about credit card payments over a loan repayment, i am not struggling to pay for the things i am doing this year, i was just looking at diff options, but it will cost me in the long run.

my main issue was that i didn't realise asking for multiple credit cards doesn't make a black mark on your rating, this is why iwas being worried for myself 8 months in the future.

I am in a stable financial position, not accruing any more debt, and even if the TT was not budgeted for, it would only make the difference of one month on all my financial plans.

my car is paid for, my new bike was a joint deal with my dad as he wanted to ride it aswell, my house extension is paid for, my only debt is what i accrued doing the naive thing of thinking a credit card is free money when i was younger (i.e. about 3 years ago).

I am not up to my eyes in debt, i was simply looking at another way of clearing the debt i have, christ i know guys with £30k debts on credit cards, and a mortgage and they are going to the TT aswell!


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## big ben (Aug 25, 2009)

maybe focus on paying one card off by October, then move the other to another interest free or get a bank loan...

it sounds like your doing all right though, better than me!!


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## ianFRST (Sep 19, 2006)

i think im going to go down the route of transferring my card balance to 0%

i got my 1st CC when i was 18, and i didnt even touch it till i was about 22 :lol: im getting worse with money the older i get!

will look at that virgin thing


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## Deanoecosse (Mar 15, 2007)

One thing, If you do go for a loan, the lender will usually ask "purpose of the loan?" You would be best to say it's for a new car or home improvements, rather than "consolidating existing debt" as this can be looked at in a negative way, as your getting credit to pay off credit.
Go to Moneysupermarket or comparethemarket and check all the loans on there and you can apply online.


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## Penfold101 (Nov 12, 2009)

0% interest is the key point here - it's essentially free money. I've bought my last few cars on credit cards then transferred them to 0% deals and paid off huge chunks each month (£1000+) due my living circumstances. (HM Forces accomodation)

The more and quicker you can pay it off the better mate - you might feel happier with some money sat in the bank for emergencies, but isn't that what the credit card is there for anyway? Pay off the loans as soon as possible then start saving. While it's interest free, you're getting FREE money and now you want to go get a loan which HAS an interest rate...? That's just wasting money...

You want out of debt, and having been in the same situation I commend you for it, so get out of it and worry about saving later. At the end of the day, whether it's money in a savings account that's used to pay a small unexpected bill, or a bit extra on the credit card which had a lower balance on it because you hadn't put money in to savings and paid off the card instead, I know which I'd choose.


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## DLC (Feb 19, 2010)

Best talk to an advisor. About 3 years ago I managed to get a good loan to cover off my credit card debts. 0% balance transfers are harder to get now and if you apply for too many, it affects your credit rating.
Best thing to do is do loads of research and then speak to someone.


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## Rick_1138 (Jan 24, 2008)

Cheers all, I am going the route of paying as I am, I am more stable in my payments and it costs me nowt but whati owe, and I have been k formed I am a safe bet for further 0% deals as I am a good payer etc.

I just have the metaphorical target for 0 debt in the new year 2011 and having all my money to do with as I please, which is sort out pension payments, save some and live credit free as much as poss.


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## VixMix (May 8, 2008)

Applying for any credit will leave a credit search trace on your credit rating. This is not a BAD thing per say, but if you have loads of them then it does get some credit companies wondering what your up to. General advice is to spread out applications and try not to get more than 3 a year. To answer your question _getting a loan or applying for another 0% card will leave the same trace on your credit report_.

What it comes down to - ultimately - is how disciplined are you? It doesn't make sense to pay less toward your debt in order to save. Think about it. You will be taking on fees and interest to get a loan out and therefore paying back more in the long term. What are you gaining by saving? Nothing, merely having the ability to have money in your pocket now while you are paying more off in the longer term. That's not good financial sense.

The only benefit I could see in taking a loan out is if you are not able to remain disciplined to manage your debts using the credit card. Obviously the credit card only gets paid when you do it, a loan gets paid every month without choice. If you have the discipline to work out a finance plan and budget to get you through the next few months then stick with that.

On that note, do write down what is going to need paying and when. I guess you should use your credit card money on those months - you have £800 to play with. Of course when the 0% deal ends in Oct, then you need to address how you are going to pay off the remainder and you have a choice, either loan; another 0% card or a low rate balance transfer CC. Obviously getting another 0% card would be your goal as it is the "free" way to manage your debt and then continue to pay as much as you can afford each month to clear this. Don't just redo the sums and work out you now have another 12 months to pay the debt off - get rid of it soonest - THEN YOU CAN START SAVING hurrah!


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## VixMix (May 8, 2008)

You mentioned whether to have emergency savings as you've had a couple of issues this year. I'll leave this bit to Martin Lewis to say as it puts it over so very well



> SURELY ITS WORTH HAVING AN EMERGENCY FUND
> 
> Emotionally, many will find what I'm about to say difficult to deal with. The idea of having some cash in a savings pot feels safe, especially as traditional budgeting logic berates us to always have an 'emergency cash fund'.
> 
> ...


Taken from Moneysavingexpert website.


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## rds1985 (Mar 7, 2009)

I work as an ops manager of a debt management company so this is my bread and butter mate 20k debts is probably around the average client debt amount
With regards to MBNA do not worry about them so long as you can afford 0.8% of the balance each month they will generally stop all interest and no credit rating damaging arrears will build up.
Egg can be slightly more stringent and tricky to deal with but barclaycard are also great. and run similarly to MBNA.
feel free to pm me or ask any further questions
Basically I don't see any reason for you to take any other financial products so long as you can show an income and expenditure showing a reduced disposable income


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## Rick_1138 (Jan 24, 2008)

Thanks for that rds.

Oh is that your fd2 in your avatar? Very nice.

I have only had 3 credit cards in 3 years, all of which bar the egg card have been zero'd until virgin offered a second bite of the 0% cherry if I transfered a balance before may. So I thought 0% was better than 24% on the barclaycard ( it was my first card hence high rate.)


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## shane_ctr (Dec 17, 2006)

Hi mate, I would personal wait untill the 0% ends and then transfer the balence again the fee is only around 2.9% it's gonna be alot cheaper than a loan


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## shane_ctr (Dec 17, 2006)

Also having a small bit of debt is a good thing gives you alot better credit rating, a friend has never had a loan or cc and couldn't get a morgage due to having no debt at all.


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## kh904 (Dec 18, 2006)

shane_ctr said:


> Also having a small bit of debt is a good thing gives you alot better credit rating, a friend has never had a loan or cc and couldn't get a morgage due to having no debt at all.


I've never taken a loan from a bank or credit card, don't have any direct debits etc so no 'credit history', but was offered a mortgage


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