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  1. #1
    DF Jedi BigBrand's Avatar
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    Default Keeping credit cards or getting a loan?

    Evening all,

    Looking for some advice on my current/worsening financial situation please.

    I currently have three credit cards.

    x1 Lloyds card, with circa £6,500 with an interest rate of 11.95% p.a
    x1 Barclays card with £2,500 on it, currently at 0% interest for a remaining 9 months.
    x1 Tesco credit card with £0 balance, and no offers and a £1250 credit limit.


    I'm comfortably making the minimum payments on both cards, with usually what ever else spare I can thrown at it (another £100 or so on each)

    I'm nervous that this Lloyds card costs me around £120 per month minimum payment with £50+ of that being interest. I want to get this paid off ASAP, but also don't want to neglect the Barclay card as when the 0% deal runs out, the interest is circa 19% p.a!

    What would you recommend here?

    Is it worth considering a Loan to pick up the Lloyds card to avoid the interest, and then make comfortable payments on the loan, and throw the excess into the Barclays card. Before finally returning to the loan to settle this early once I've build funds up?

    I did have a £1000 overdraft recently, but the Lloyds credit card recently offered me a cash transfer from the credit card to my current account at 0% interest for 12 months. Which I did, so in fact there is circa £7,500 on the Lloyds card, although only £6.500 is costing me currently.

    ANy help would be great/

  2. #2
    DF PiMP Fon's Avatar
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    Default Re: Keeping credit cards or getting a loan?

    Best thing I ever did 20 years ago....

    Cutt up the cards,

    got a loan to pay off the cards,

    Have been debt free since..

    Its a lovely feeling when you get that first wage packet and its all YOURS!

    Just save up for shit when you need it, and dont borrow again.

    Fon

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  3. #3
    DF Jedi BigBrand's Avatar
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    Default Re: Keeping credit cards or getting a loan?

    Sounds easy, I presume you have were paying the loan off for some time?

    Am I better getting a loan and paying the interest credit only, as a loan will be at a reduced APR rate? And then just paying the loan back over a period of time.

    I don't see the point in getting a loan to cover a credit card that's not costing me any interest you see, seems pointless.

  4. #4
    DF Super Moderator Over Carl's Avatar
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    Default Re: Keeping credit cards or getting a loan?

    Firstly I would say it doesn't make much sense to me to move a balance from a 0% card to an interest paying loan. Why not wait until you have no more interest free credit available then take then loan? By then hopefully you will have chipped away at the debt so you won't be paying any interest until then, then you will save interest on whatever you have paid off the debt.

    Personally I avoided the entire banking system for 10+ years.

    I have recently acquired credit, not with the intention to borrow but to build my credit rating. I imagine the whole credit rating thing as a score in a computer game, where we know we can do certain things to quickly build the score. (Think of paying a debt in full early as a triple punch combo).

    Funny thing is how people can devote masses of time to trivial games, yet pay no attention to the one computer game that can make a massive difference to your life.

    2 Thanks given to Over Carl

    akimba (19th February 2015), BigBrand (19th February 2015) 


  5. #5
    DF PiMP Fon's Avatar
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    Default Re: Keeping credit cards or getting a loan?

    You are correct that paying the 0% ballance with a loan would cost you more.

    However, its more of a life changing moment, and turning a corner in your life, for me.

    Cut them up, work out a way to pay em off, and never use them again.

    Fon

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  6. #6
    DF Super Moderator
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    Default Re: Keeping credit cards or getting a loan?

    I'm not sure if this is for you as I haven't used a balance transfer but from my understanding it allows you to transfer balances from other cards to a single card and by the sounds of it this will buy you 3 years of interest free payments before taking out a loan to cover the debt. I'm sure if you read the thread there will be helpful pointers as they are thrifty over at hukd.

    [Only registered and activated users can see links. ]

    Thanks to evilsatan

    BigBrand (19th February 2015) 


  7. #7
    DF Jedi BigBrand's Avatar
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    Default Re: Keeping credit cards or getting a loan?

    Thanks been reading up, whilst I've done some soft searches and have a 75% chance of getting a card like this, I've read that they often only have balances of circa £2500, meaning I'd need two of them to pay my Lloyds card off.

    In addition they have high monthly minimum payments, which if you miss, you lose the deal and have circa 20% APR on them.

    I'm thinking of a loan at this stage, clear my interest based credit card debts, continue to pay the Barclay card off along with the loan.

    Once the Barclay card is done, start to put cash away to settle the loan early.

  8. #8
    DF PlaYa Rhinoz's Avatar
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    Default Re: Keeping credit cards or getting a loan?

    I'm with Fon on this, get rid of the cards and never be tempted again.

    You will find when you don't have a card to pay for something you just fancied that it makes you think more about what it is your buying.

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  9. #9
    DF Jedi BigBrand's Avatar
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    Default Re: Keeping credit cards or getting a loan?

    Quote Originally Posted by Rhinoz View Post
    I'm with Fon on this, get rid of the cards and never be tempted again.

    You will find when you don't have a card to pay for something you just fancied that it makes you think more about what it is your buying.
    I've not spent on the cards in circa 5 months and don't plan too. But that doesn't solve the issue of the most financially suitable and logical path of clearing the interest covered debt.

    Are we all in agreement, I should get a loan to pay it off at all costs?

    Thanks to BigBrand

    Rhinoz (19th February 2015) 


  10. #10
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    Default Re: Keeping credit cards or getting a loan?

    You've got to attack that Lloyds debt first mate. A loan should be at a really favourable rate nowadays although I'll admit I haven't paid any attention to it for years. You say you're meeting the minimum payment & some extra each month so that suggests you have your daily budgeting sorted out and these cards are old debts. You'd need a £9k loan to clear them both do you think you will get that no probs? If your current account is Club Lloyds you get 4% per month on balances of £5k, a sliding scale for lower. If you can get the full £9k loan to cover both cards I'd pay off the Lloyds one straight away and leave the remaining £2.5k in a club Lloyds account doing a little bit of work until the Barclaycard 0% period ends and then pay it off immediately, maybe just before.

    Edit - and then you'll already have started paying off the £9k over 3, 4, 5 years or whatever period you can manage. Obviously the sooner the better.

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  11. #11
    DF Wh0re Markymoo's Avatar
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    Default Re: Keeping credit cards or getting a loan?

    I was in a similar situation, so eventually I just bit the bullet got a loan to cover all my debt. I now have a monthly payment for the next 3 year (which is lower than I was paying before hand eachmonth) and I've cut up my cards. the relief I got from doing this was amazing, it has also freed up more money that I would have been paying out.

    2 Thanks given to Markymoo

    BigBrand (19th February 2015), Fon (19th February 2015) 


  12. #12
    DF Jedi BigBrand's Avatar
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    Default Re: Keeping credit cards or getting a loan?

    Thanks guys, I think I'm doing a loan for the Lloyds card, but will address the Barclays one when it's due, perhaps with a loan in the wifes name or something. I'll use the extra money (difference between card repayments and loan repayments) and throw that into the credit card.

    Always wanted to keep a card for "emergency" but it's one fcking slippery slope!

  13. #13
    DF PwNagE dpSparhawk's Avatar
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    Default Re: Keeping credit cards or getting a loan?

    Be careful getting a loan for the Barclays card. The smaller the loan, the higher the interest rate (well at least it always seems to be)

    e.g First direct would give you a loan for £2.5K but charge you 13.9% APR.

    However, if you took a £9K loan out with them to cover both cards, they would give you an APR of 3.6%

    (Taking a loan out for the £6.5K is a 4.9% APR).
    I've not looked at what other interest rates other banks etc. would give you but they're all going to be very similar I imagine.

    Thanks to dpSparhawk

    BigBrand (19th February 2015) 


  14. #14
    DF Jedi akimba's Avatar
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    Default Re: Keeping credit cards or getting a loan?

    As said above lump the whole lot on a loan set up the direct debit and sit back, relax and let all the stress flow out of your body

    2 Thanks given to akimba

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  15. #15
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    Default Re: Keeping credit cards or getting a loan?

    personally i wouldn't go for the loan to pay off the debt, isnt that a big no no???
    cut them up first
    as evil said get the barclay on from hukd transfer the balance, its stupid to transfer ur already 0%
    if falling that ring loyds and ask them to freeze ur interest for 3 months as ur on hard times and pay as much of as u can then look at it again in three months
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    Thanks to B B Leo

    BigBrand (19th February 2015) 


  16. #16
    DF Jedi bbshark's Avatar
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    Default Re: Keeping credit cards or getting a loan?

    my 2p worth from experiance

    ALWAYS pay off the highest interest rate first
    ALWAYS pay off as much as you can afford

    First work out how much you can afford to pay out each month and then take 10% off. (this is in case you need to pay a bill)
    Going to use random figures here.


    Without getting a loan

    you can afford to pay out £500 a month so take 10% off making that £450 to pay off your debts. (take the £50 and put it in a savings account so you wont need to get anything on the cards if an emergency arises)
    on your lowest debts pay the minimum payment so we will say your minimum payment is £50 on your 0% card. that leaves £400 to put on the highest card.

    At the point the 0% stops you would pay the minimum payment on the lowest interest card and the rest on the highest. The reason you do this is you will save on interest in the long term.

    With a loan.

    This is more complicated and its easy to get worse into debt.

    Again work out what you can afford to pay and take 10% off so again we will go for £500. £450 to debts and £50 to save.

    Loans are complicated because you can get a lower interest rate by borrowing more and thats where you can end up in more debt. Golden rule is to never borrow more than you need to but if you can borrow more but pay back less then you go for that.

    use this calc to work out what you can afford with the interest rates and total costs [Only registered and activated users can see links. ]

    so we have £450 to pay off debts. divide you 0% card by however many months are left and pay that off the card (or the minimum payment whichever is higher.) we will say this is £50 a month for simplicity.

    You can then get a loan that you can pay upto £400 a month off however DO NOT get a loan that you will have to pay this much a month off, instead get one that the minimum payment is half of that if you can so £200 leaving £200 to pay off debts. this is why you dont want to borrow more than you need. Then you pay off the minimum loan amount and the extra £200 as well. which will bring the time to pay it off and the interest cost way way down.

    The reason you dont get it for the full amount you can afford is because things change ad you might come to a point where you cant pay the full £400 say your fridge breaks. this means you have your savings amount and the £200 towards a new one.

    Before you make a choice work out whats going to cost you the least in interest costs.

    Hope that helps good luck.
    bbshark. The Member with the first ever DF Fine

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  17. #17
    DF Jedi BigBrand's Avatar
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    Default Re: Keeping credit cards or getting a loan?

    Thank you all very much, I know it makes absolute sense to clear the interest card, but not to commit to paying your maximum.

    I'm going to do some real number crunching this weekend, and also look to pull in some shares and savings and sell a few things and see where that takes me in terms of paying lump sums, to make it small enough to do a balance transfer.

  18. #18
    DF Jedi BigBrand's Avatar
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    Default Re: Keeping credit cards or getting a loan?

    Thought I would update this, after my initial post the credit cards got me into much more debt,

    by January 2016, I was over double what I had put on the above volumes.

    However, I started taking the advice of above, and those reviews around me, and set myself a plan to clear it.

    I can happily confirm that as of this morning, I'm DEBT FREE, WOW that feels good. I also have £500 emergency fund, sat accessible, and also over £3k and growing in savings!

    What a fucking feeling knowing i'll never go back to that. I don't have any credit cards now at all!

    11 Thanks given to BigBrand

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  19. #19
    DF PlaYa Rhinoz's Avatar
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    Default Re: Keeping credit cards or getting a loan?

    Well done m8, it's the best feeling in the world when you come out the other side.

    Thanks to Rhinoz

    BigBrand (8th March 2017) 


  20. #20
    DF Jedi Ashley's Avatar
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    Default Re: Keeping credit cards or getting a loan?

    Well done, must feel great.

    I've got about £1300 to pay and I'm done too.

    Thanks to Ashley

    BigBrand (8th March 2017) 


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