Debt help. Consolodate or snowball method

[Khanny]

Please no judgement, I'm looking for some help as I have got myself into a debt of approx £13K on a credit card, paypal and a loan. I'm currently paying back £489.00 per month and its breaking me. It started off in Covid when I was out of work for around 8 months and now I'm paying back the minimum payments its just not going down. Am I best off trying the snowball method and paying off the smallest debt first or trying to get a loan big enough to pay off everything I owe and then have one monthly payment. My credit rating is now not great and I have never been in this state before so am feeling pretty shit to say the least.

TIA xx

Have you considered a DRO?

I haven't no, but as I am a home owner I don't know that I will be considered.

No-one can advise without details of your incomings, outgoings and assets.

You need professional advice from a debt advice charity or at least post on the Debt Free Wannabe on Moneysavingexpert.com.

But a big loan is unlikely to help when you've already got behind with payments as it's likely the interest rate will be high, making it more unaffordable and expensive.

Spend some time listing everything you owe and the interest rates and going through your monthly budget to see what money you have available each month to pay off the debts then get some personal advice. Once minimum payments are covered you want to look at paying the debt with the highest interest rate as that's the debt that's increasing the quickest. You might want to look into a whether you qualify for a 0% credit card

The snow ball effects sees the challenge of reducing debt.

If you consolidate, you will just forget the debt and may take out more.

What are you doing to reduce other outgoings to throw at the debt - how much do you earn?

What interest rates are they on? Over how many years?

I would suggest StepChange. I know a lot of people for whom it’s been a life changer and life saver. It messes up your credit rating but you can get credit again when you finish the plan. It’s better than struggling each month and they stop the interest running.

Concentrate on paying off the debt on the highest interest rate throw any spare cash at this one to pay off quicker. I assume you can’t transfer any onto a 0% credit card (if you haven’t explored this option check out martin Lewis 0% cards) Sit down list all the debts with each interest rate to put them in priority order.

I think there are a couple of things here and I often suggest looking at the Dave Ramsey method. There’s lots of Dave-ish groups on FB; it’s an American thing so people tend to amend it.
Firstly I’d be looking at your budget, and then profiling how long each options of paying off speeds up the term. All the best for whatever you choose, one day this debt will be gone.

I would suggest StepChange. I know a lot of people for whom it’s been a life changer and life saver. It messes up your credit rating but you can get credit again when you finish the plan. It’s better than struggling each month and they stop the interest running

StepChange is simply a debt advisory service. There is no 'the plan' - there are a number of solutions and approaches they may suggest, some of which will have a significant impact on your credit file, some minor and some none.

Getting advice from StepChange will have no impact at all.

Is there anything you can sell small to big to pay a chunk off?

1. target most expensive debt first, the one with the highest interest rate.
2. call credit card providers and get the interest frozen - agree a repayment plan
3. overpay credit card by small amount to reduce balance
4. do a spreadsheet/plan on paper so you can see the progress and the ‘end’ of each debt - this can be reassuring

Are you truly living as frugal as possible? Can you set yourself no spend challenge? Even if you most do it for a month or two? Sometimes this can make you realise what you really value and when you’ve have paid the debt off you free to save for stuff you never realised you could -

You’ve had loads of advice to consolidate this and you will be able to rebuild credit

They do help. They can sort out a DMP although it trashes credit rating. They don’t charge, so worth a phone call.

Thanks everybody for your advice. Taking it all on board and the no spend challenge sounds good xx

I snowballed my way out of £30k credit card debt. It was spread across multiple cards, some zero per cent, but once I set up a spreadsheet to actively manage it, I cleared it pretty quickly for the amount. Never been in debt since. You’re in a much better position than I was, so go for it - but no more cc spending while you do it

The biggest tip i can give you is to check your bank account daily - if not twice a day. Know where you are, remember er what you’ve spent and keep on top of it!

I used to ignore banks statement’s.

All those ‘extras and treats’ add up!

I would also suggest putting your 'spending money' in a separate account to your bills money, perhaps even further separating money for essentials like food and petrol from non essentials such as coffees and days out.

Also don't forget to set aside money for annual and irregular costs like car insurance, repairs etc before seeing money as available for debt repayments or non essential spending.

This is how a lot of people struggle when dealing with debt as they forget about a large part of their essential bills and overestimate what they can repay or spend. You need a sustainable budget that you can live on while getting out of debt and not borrowing more.

I’d also suggest the Dave Ramsey method. Worked for us. Now debt free.

I third Dave Ramsey, he is quite inspiring about getting out of debt and staying there. Have a look at zero based budgeting. It sounds like a bit of a sense of control would be helpful.

I paid off a similar amount in a year with a lot of focus. I recognise that there is an element of fortune in that as well.

good luck OP!

Aww well done to you I bet that was such a relief! Did you snowball by paying the smallest balance off first?

No, the most expensive. I had a spreadsheet with all the card balances and the interest rates, and just tackled them in order of interest rates. It was over ten years ago now, and I’ve never let myself get in that state again!

In the UK, the snowball method is generally taken to mean in order of interest rate, starting with the highest, which makes the most sense financially.

It can be tempting to start with the smallest debt, especially if it simplifies your finances and gives you a mental boost because you feel like you're getting somewhere.

However, you'd end up paying more interest doing it that way. Have you got a budget and have you minimised your spending, especially on non essentials. Have a look at Moneysaving Expert for advice.

https://www.moneysavingexpert.com/loans/debt-help-plan/

I have just put myself a spreadsheet together listing what I owe to who and the interest rates. The highest interest rate is actually on my lowest debt! But I will work through this now, I feel a little better knowing I'm actually trying to come to terms with it and not just ignore it and pretend its not there! Thank you all x

I have just updated a very old spreadsheet that might help

https://docs.google.com/spreadsheets/d/1XQ18836Z95mszrrd8EVZcwCMguT2RWSEQUlEEF6tJ8s/edit?usp=sharing

I recommend contacting Step Change, they have helped several people that I know.

Total up your debts, look at the overall interest, see how much a separate bank loan would cost you. But I have seen people clear debt with loans and then build it up again because they cant stop their spending on credit.

Whatever you do to clear it, you need to cut up your cards, live on the money in your bank account and don't get into any more debt. It's hard, but it's the only way to clear the debt

Have your money paid into one account, then transfer it to another account to pay the bills, and transfer any excess to a savings account that doesn't have a card.