Advice needed - debts and Settling credit cards

[teenagersandatoddler]

I am looking for some advice. I have £19,000 of credit card debt. I have £17,000 incoming and want to use this to pay my debts but also put £2k into savings.
My credit score is good. I am thinking about settling my accounts rather than paying in full so that I have some savings but aware this could impact my credit score. Please give me some advice!

Are you currently managing to pay the minimum payments? (I assume so, if you have a good credit rating.)

Are you going to need credit in the future - mortgage, rent credit check etc?

If you want to come to an arrangement to settle for less than the total debt, the lenders won’t be at all interested until you have defaulted on your payments over a period of months; it can take a long time. Even then, they’re not likely to offer you much discount until you haven’t been paying/paying only a token amount for years.

So in order to do this you will need to deliberately trash your credit rating and it can take a long time.

What do you owe, and to whom? What are the interest rates? (And do you know how the debt came about and how to stop running up more in the future?)

I have taken a new job and the interest rates are killing me - min payment is £179 on both. I am shit with money so just want them gone and closed

We have to remortgage in May which I am anxious about

So you've got 17k coming to you and want to save 2k - so that's 15k for the debts.

That's 4k short of the 19k you owe on credit cards, the company's aren't likely to write off 4k of the debt just because you'd like to settle your accounts but don't quite have enough. Is the 19k all on different cards? If so, use the 15k to pay off the ones with the highest interest rate first. Then leave the balance of 4k that you'll owe on the cards with the lowest interest rates. Then the monthly payment should be much less than you're paying now and you will be able to overpay it and clear it off in time?

If your credit rating is good, no defaults etc. you’d be better off paying £15000 off from debt, save £2k and focus on paying down the remaining £4k over the next year. Coming from that much debt to just £4k is a massive leap and looks good when remortgaging. Not all debt is bad debt if you’re managing this and you can afford the repayment. I would suggest reducing the credit limit when you have paid this off to stop further temptation.

Do not offer a settlement figure! Looks bad on your credit score and they’ll also close the account. Meaning it’ll show as settled on your score for years. It’s not a good look. Pay it down, focus on paying it off by next year and work your way up! You’re paying close to £400 a month now, you’d pay £4k off in 10 months if you keep it up.

pay off the 15k and then keep at the current minimum payment which will clear the rest quickly.

be prepared that the cc limit will likely be reduced after you paid it, which is not a bad thing.

If you pay off most of your debt (£15K) leaving only £4K to pay off, then you’ll probably be able to balance transfer the £4K to a 0% card.

Are you paying £179 per month, or £358 (2x £179)?

At £179 per month you’d pay off £4K in 22 months.

At £358 it would be gone in less than a year.

And if you’re ‘shit with money’ now is the time to promise yourself you won’t be any more. Make a realistic budget. Only spend what you can afford. Don’t use the credit cards. Save every month for predictable expenses like Christmas, holidays, car tyres, house repairs.

My credit score is good. I am thinking about settling my accounts rather than paying in full so that I have some savings but aware this could impact my credit score. Please give me some advice

This is a stupid idea. Forget all about it. If you do this, it will ruin your credit rating for the next 6 years, you won't be able to remortgage, so you'll have to go on the SVR, which will cost you far more than the £4k that you'll save if you go through with this ridiculous plan.

Take the £17k and use it to pay off the debt that charges the highest interest. If you're currently making minimum payments on £19k worth of debt, paying off the remaining £2k will take no time at all.

Look on Moneysaving Expert for a 0% balance transfer offer, or see if one is available from one of your existing cards. Transfer the £2k and set up a standing order to pay it off before the end of the offer period, ensuring that you pay more than the minimum payment each month. As your debt is now interest free, you can also save at the same time, as you can get 4%+ on instant access savings.

What are you paying out in interest rates?
What interest rate will you get back on the money you put on deposit?

Its not "savings" as you will still owe 4k with 2k of credit available in cash.

If its 19K owed
annual payments are 179x 2x 12 = 4,296

If you pay off the 17k in full you shold be able to pay off the other 2k in 6 mthsish and have 2k back in the bank in little over a year

Are you able to pay off the 15k then move the 4K onto a 0% interest card? That will help you clear it quicker…

Can you consolidate into a 0% interest or a low interest loan and then throw everything at reducing it down - would help as would be paying of the debt rather than just the interest being accrued on it. Might also be worth speaking to mortgage brokers about this if need to remortgage next year- ask about the impacts of the debt on ability to remortgage and if any specific actions would cause problems.

I am thinking about settling my accounts rather than paying in full so that I have some savings but aware this could impact my credit score

Impact is putting it mildly. You'd first need to STOP paying your cards and allow the accounts to default and close over 3-6 months. Then you could offer a settlement lower than the outstanding balance for each card. But you'd have a default on your credit file for each card that would stay there for 6 years.

Your credit score would drop like a stone and the chance of a remortgage next year with a different lender would be zero.