# Re-financing credit card debt?



## noname! (4 Jan 2012)

Hi all, first post here, wish it could be on a more positive note.
I have just been told by my mother that she owes 8000 euro on her credit card, I am in shock at the amount, I knew she owed a grand or two but had no idea it was anywhere near this figure. She says it was mainly incurred through my sisters wedding. At the moment she is paying back 200 euro a month, which is just barely paying over the interest( 1.52% a month).
She has been burying her head in the sand regards the debt. There has to be a better option to repay it than this interest rate? annual interest rate is 1.52x 12 so 18.24% . 
I have looked at credit union loan rates, and tbh I find there system a bit confusing and can't work out what there actual "real" rate of interest is?
Is the bank the best option at 11.5% per annum? Also will they lend to her, she has been a customer of B.O.I for forty years, but doesn't have much in way of savings at present maybe roughly 1000, and doesn't have any asset to secure the loan against.
Any advise would be greatly appreciated, thanks.


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## Slim (4 Jan 2012)

noname! said:


> Hi all, first post here, wish it could be on a more positive note.
> I have just been told by my mother that she owes 8000 euro on her credit card, I am in shock at the amount, I knew she owed a grand or two but had no idea it was anywhere near this figure. She says it was mainly incurred through my sisters wedding. At the moment she is paying back 200 euro a month, which is just barely paying over the interest( 1.52% a month).
> She has been burying her head in the sand regards the debt. There has to be a better option to repay it than this interest rate? annual interest rate is 1.52x 12 so 18.24% .
> I have looked at credit union loan rates, and tbh I find there system a bit confusing and can't work out what there actual "real" rate of interest is?
> ...


 
Sorry to hear about your Mum's debt. Assuming that you would rather she did not default on the debt, her options are limited. You do not say if she is a member of a credit union. Each credit union is different and can charge different rates of interest, although the maximum is 1% pm, 12.68% APR. If she has about €2,000 in shares in the CU, she should be able to get a loan of €8,000 but I think you might have mentione dthat if she had. No harm having a chat with the local CU manager. Otherwise, it might be worth having a chat with the BOI. Many on this forum would argue that tying up your shares in the CU is an expensive way of borrowing and leads to an APR much higher than quoted. would there4 be any way the family could help her out, even to secure a credit union loan?


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## RichInSpirit (4 Jan 2012)

If your mother is not worried about her credit rating and doesn't need to borrow in the near term , I would advise her to stop paying her credit card for about a year. You'll get put on zero interest and can pay back a percentage of the loan if you want .

Disclaimer - This course of action will probably damage your credit history .


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## donee (4 Jan 2012)

why do you think that the credit union membership should by bailing out your mother bail out the credit card company


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## so-crates (4 Jan 2012)

A term loan to clear the balance would seem the best approach,as long as your mother does not use the credit card while clearing the loan. I am going to guess that her affordable repayment would be €200pm so she would need a loan for about two and a half to three years. If she doesn't have a CU account it may be easier to approach a bank. But I would suggest a conversation with each of the possible lenders to see what they offer.


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## noname! (4 Jan 2012)

Thanks for the replies , I'm grateful for all ye're input.
She actually does have a credit union account, there is currently around 500 in there. As I said earlier she has been burying her head in the sand regarding it, and still wants "to keep it quiet". I myself am in my final year of uni and not working at the moment so I can't help her out in my current situation,as I also have some debt myself (a lot less). If I can convince her to say it to my sister we might be able to get the credit union savings up to 2000. Am I right in thinking the CU is the more expensive option in "real" terms versus B.O.I?
What would the repercussions be if she went down the route  "RichInSpirit" suggested? If she stopped making repayments wouldn't the overall amount she would owe by the time they put her on zero interest by much higher, and therefore make her worse off overall?


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## so-crates (5 Jan 2012)

What RichInSpirit is suggesting is that your mother wreck her credit rating for at least 5 years in order to avoid interest. I wouldn't consider it a sensible approach in most if not all cases, your mother may have a limited income but it is currently on top of all her debts. She probably would prefer to try and keep it that way. The interest would continue to accrue in the interim, though the credit card company may take a settlement figure of less than what is owed. This would be a rather uncertain approach and would be stressful as the cc company would not wait quietly by while your mother's debt racks up. Each credit union is different, your mother would need to talk to her own credit union to find out what they can do for her. If she has a long history with them they may be willing to consider her for a loan with her present level of shares. She is currently demonstrating that she can repay it is the interest rate that is killing her, addressing that would be the best approach. Like I said, shop around, ask the banks, ask the credit union, try and access a term loan at a lower rate, chances are her cc rate will be higher than any loan rate.


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## RichInSpirit (5 Jan 2012)

On mature reflection my idea mightn't be the most elegant of solutions. 
I think the credit union would be sympathetic to your mothers problem. Maybe a visit to MABS beforehand to devise a plan would help too.
Another option would be to do a balance transfer to another credit card company doing the 0% introductory offer and pay down the debt as quickly as possible. And try and balance transfer again when the zero % runs out.


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## so-crates (5 Jan 2012)

Balance transfer to a zero interest card would definitely be the cheapest. If it is possible that would be worth trying. It would be imperative though that your mother does not use the credit card. One of the problems with the balance transfer is that you pay off the new purchases and the consequent interest first so if you used the card the €200 would first pay off the new purchase and not the €8000. However, as I already said, if she takes out a term loan she needs to be really careful not to use the credit card so the same rule applies. Basically move the debt to as low an interest rate as she can achieve and do not use the credit card until the €8k is paid off.


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## noname! (6 Jan 2012)

I tried to link the webpage from creditcard.ie showing the 0% balance transfer card options, but this forum won't let my link url's as I don't have 15 posts. 
I simply typed "balance transfer credit cards ireland" into google and it is the first non-sponsored site.
Can someone advise which is the best option, I am honestly clueless, and don't want to put my mother in a worse situation than the one she is currently in. I don't think  the first one is an option, as her current credit card is with bank of Ireland, so I can't see them agreeing to let her transfer to another one of there cards if it is going to earn them less money( via zero % interest). 
Thanks again for all ye're help .


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## RichInSpirit (7 Jan 2012)

Zero interest on balance transfers mostly only last for 6 months around. Then you've got tp find somewhere else to balance transfer to. 
There would be a degree of effort and discipline involved in clearing the debt by this means. 
Assuming you did balance transfer the €8000 and could keep repaying 200 per month the balance would be down to 6800 in 6 months but after that an interest rate charge would come into play, probably very high, so you would have to balance transfer again to a different company . 
I'm not sure of how many credit card companies are still left in the Irish market, or if you could balance transfer back to a company than you left 6 months or a year ago.


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## so-crates (7 Jan 2012)

Although the zero interest option Is very attractive, as RichInSpirit has pointed out it is only a short term facility and it is dependent on strictly avoiding any purchases on the credit card. You need to look at the interest free time period and the interest the outstanding balance will attract in 6 months time (in case you don't move the balance again in 6months). These are offered because the suppliers are well aware that most people succumb and start using their card and start racking up the interest again so it is a risky approach. A loan will not be 0% but it has the advantage of being a single step, no need to look for another lender for six months time.


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## so-crates (8 Jan 2012)

Useful article in the Sunday Business Post talking about credit card debt noname!, your mum should have aread of it. It gives some specific advice on how to pay the debt off.


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## Bronte (9 Jan 2012)

donee said:


> why do you think that the credit union membership should by bailing out your mother bail out the credit card company


 What is wrong with the credit union helping the mother out, they are a very nice understanding membership. It would not be bailing her out.

Noname, as a first step your mother should cut up the credit card.  Is there any family member who would pay back the debt and them your mother could pay them back at a rate of 200 a month?  Other than that the term loan from the bank, maybe just maybe Bank of Ireland will agree to that to let her pay back the credit card, you could go to the bank with her, and the credit union is another excellent idea.


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## ClubMan (9 Jan 2012)

Slim said:


> Each credit union is different and can charge different rates of interest, although the maximum is 1% pm, 12.68% APR.


The effective cost of _CU _borrowing will not be reflected in the _APR _as it is with most or all other financial institutions. You also have to factor in the fact that a borrower will generally be required to keep c. 25%+ of the borrowed amount on deposit/in shares at a marginal rate of return (c. 1% in most cases). This will increase the effective cost of borrowing.

What is your mother's income and how much can she afford to direct towards debt repayment regardless of what type it is (e.g. _CC_, _CU_, unsecured personal bank loan etc.)?


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