Climbing out of debt - advice needed

G

greenfly

Guest
I've started to take stock of my financial position, and it isn't looking pretty. I've racked up considerable debt over the last 6 months due to some personal events in my life and basically, it's looking like this:
  • 6K on my credit card
  • 13k owed to credit union
  • 2.5k bank overdraft
I'm trying not to panic, but rather take some sensible steps to take back control of my finances. I've been sloppy about budgeting over the past 6 months, but will start sticking to a new, stricter spending regime from now, which should free up approx €800 per month to service these debts.

I'm not worried about the 13k credit union loan, as I'm making regular payments and am planning to pay it off when my SSIA matures (15k in April). However, the credit card and overdraft are worrying .... my plan is to reduce the overdraft to the sanctioned limit ASAP and then start making regular, large payments to my credit card.

Also, I'm often caught out by large annual payments (e.g. car insurance, apartment service charges, etc.) and end up sticking them on the credit card - where they linger for months. How do other people manage to pay these annual / semi-annual large payments?

I'd appreciate any advice/feedback on tackling this.
 
I'd increse the loan with the credit union and pay of the credit card and overdraft. Cut up the credit card.
With regard to the large annual payments I was finding the same problem as you years ago so I set up a seperate account and worked out what it cost weekly (as that's how I am paid) to service these bills and lodged that amount into the account weekly. Therefore the money is there when the bill comes in. It's hard work for the first year as you seem to be double paying but it has been well worth it.
Good luck.
 
greenfly said:
I've started to take stock of my financial position, and it isn't looking pretty. I've racked up considerable debt over the last 6 months due to some personal events in my life and basically, it's looking like this:
  • 6K on my credit card
  • 13k owed to credit union
  • 2.5k bank overdraft
I'm trying not to panic, but rather take some sensible steps to take back control of my finances. I've been sloppy about budgeting over the past 6 months, but will start sticking to a new, stricter spending regime from now, which should free up approx €800 per month to service these debts.

I'm not worried about the 13k credit union loan, as I'm making regular payments and am planning to pay it off when my SSIA matures (15k in April). However, the credit card and overdraft are worrying .... my plan is to reduce the overdraft to the sanctioned limit ASAP and then start making regular, large payments to my credit card.

Also, I'm often caught out by large annual payments (e.g. car insurance, apartment service charges, etc.) and end up sticking them on the credit card - where they linger for months. How do other people manage to pay these annual / semi-annual large payments?

I'd appreciate any advice/feedback on tackling this.
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my advise without knowing too much about your personal circumstances, deal with the most expensive debt first:

1. transfer 6k onto 6 month interest free credit card, (this is a temporary solution and you may not actually be able to get it all transferred, make get rid of cards so that they cannot be used)
2. work on paying overdraft off, see if you can get a break from credit union on loan payements
3. Use SSIA to pay off credit card & balance of credit union load (if no excessive penalities involved in paying off credit union early i.e. the interest saved should be more than any penalities incurred).

Most people tend to budget for these larger costs that will appear through out the year. I used to do the same as you bung it on the credit card but pay it off at the end of the month.

Also see if you are due any tax back, get your tax balanced for the last few years, put in your Med1s, rent allowance, bin charges etc and use this money to put against your loans...
 
Have you had a search for the many existing threads on situations similar to your own?

Personally, I would tackle the credit card and the overdraft with the SSIA money before I would pay down the credit union loan.

Is there any chance you could do a balance transfer on your credit card to one which gives you interest free period for 6 months? With your current outstandings, then maybe not, but it's worth looking at.

Do you really need a car? Would selling realise some cash? Enough to make a dent in your cc and OD?

I guess I would tend to pay for car insurance by direct debit (over 10 months generally) and pay the finance charge (8-10%) than put it on credit card, but I haven't been doing this since the premium has fallen to a manageable level.

With management charges, we used to set aside €100 each month to meet the annual payment.
 
Most car insurance you can pay by installments, maybe that might be an option, saves you getting landed with 1 big hit and spreads it out over the year. (I know it will cost a few extra euro but not a lot, it may just help overall).

Totally agree that the CC and overdraft are the main priorities to pay off first (i.e now) and then with your SSIA. Im sure the interest is the highest on both of these compared to the CU loan. Have you approached your CU to try and restructure the loan payments?

I dont about your lifestyle but try forgo a night on the beer every so often - you would be amazed how much it saves!! (beer+taxis etc. can add up to €100 easily) - this maybe already included in your proposed chnages though!
 
Thanks for all the advice - some good points made. I'll definitely look into paying the car insurance monthly rather than an annual lump sum (part of my finance rationalisation involves passing my driving test to reduce my premium).

Am considering consolidating my credit card debt and overdraft into a new credit card - such as the Ulster Bank Zinc card (0% on balance transfers for 9 months) - to give me some breathing room while I get the principle down a bit.

Once I do that, I'm hoping my restrained monthly budgeting will allow me reduce the debt substantially over the next 6 months.
 
greenfly said:
Am considering consolidating my credit card debt and overdraft into a new credit card - such as the Ulster Bank Zinc card (0% on balance transfers for 9 months) - to give me some breathing room while I get the principle down a bit.

Once I do that, I'm hoping my restrained monthly budgeting will allow me reduce the debt substantially over the next 6 months.
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Are you mad? Why replace a credit card with another. You will only rack up another credit card bill. Why don't you pay off your credit card and overdraft with your ssia and maybe also reduce the credit union loan. It is very easy saying you are going to clear your credit card over the next 6 months but it will be a lot harder if you are going to carry on using it.
 
gailey said:
Are you mad? Why replace a credit card with another. You will only rack up another credit card bill. Why don't you pay off your credit card and overdraft with your ssia and maybe also reduce the credit union loan. It is very easy saying you are going to clear your credit card over the next 6 months but it will be a lot harder if you are going to carry on using it.
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I do plan on paying off my credit card and overdraft with my SSIA, but it doesn't mature until April. Hence, I'm going to transfer the balances to a zero-interest card for a couple of months, so I don't rack up further charges. Once I do this, I won't use the new card for any purchases, but only to reduce payments.
 
I think greenfly is right - credit cards are a crock - the sooner we all figure this out and start putting pressure on banks to offer cards with lower interest the better.

The other thing is not to panic. You might need to talk to your bank or credit union. Very often they will happily oblige a different repayment schedule, once they know what is happening.
 
I have 3000 boivisa debt and 3000 od. i applied for mbna cc transfer and got quickly accepted with 7000euro limit at 1.9% till june. I can now transfer 3000 to cc and 3000 to od account clearing them at 1.9%. I think it's ok as it is some breathing space and I also have lump sum in april ssia. But then i mite transfer the amount then to another cc account at 0%.
 
thaiaddict said:
I think it's ok as it is some breathing space and I also have lump sum in april ssia. But then i mite transfer the amount then to another cc account at 0%.
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Why would you not use your SSIA to reduce or clear the debt at that stage?
 
Was just thinking would like to hold on to the wonga ( ONLY ABOUT 12,000 THO) to spoil meself a bit, holiday, tv system etc etc a car maybe,(youd think i won the lotto wouldent ya!)

Would it not be worth transferring some to a 0%, was going to throw maybe a couple of grand at it, depending on cirmunstances, but i think it's just a state of mind, having saved for so long you dont really want to spend it all on debt.
 
thaiaddict said:
Was just thinking would like to hold on to the wonga ( ONLY ABOUT 12,000 THO) to spoil meself a bit, holiday, tv system etc etc a car maybe,(youd think i won the lotto wouldent ya!)

Would it not be worth transferring some to a 0%, was going to throw maybe a couple of grand at it, depending on cirmunstances, but i think it's just a state of mind, having saved for so long you dont really want to spend it all on debt.
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It doesn't really make sense to blow your savings on luxuries/discretionary spending when you have significant debts outstanding. It's obviously up to you though.
 
If I were you I would ask the CU would they loan me an extra 8.5K to clear your other debts and then repay the CU with the SSIA. Ask the CU do they operate budget accounts, mine does. For the likes of insurance they issue the cheque to you the week before your renewal is due.
 
Froggie said:
If I were you I would ask the CU would they loan me an extra 8.5K to clear your other debts and then repay the CU with the SSIA.
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I don't get this. Why not just clear the debts directly with the SSIA funds? Why involve the CU at all? :confused:
 
You could contact Money Advice Bureau Service if youneed support in your efforts. I'd do what you said. Zero rate credit card until SSIA available to pay off. Also in April, pay off overdraft and CANCEL FACILITY! That's the killer one, having it there if you need it. After that, stick to your budget!
 
thaiaddict said:
Was just thinking would like to hold on to the wonga ( ONLY ABOUT 12,000 THO) to spoil meself a bit, holiday, tv system etc etc a car maybe,(youd think i won the lotto wouldent ya!)

Would it not be worth transferring some to a 0%, was going to throw maybe a couple of grand at it, depending on cirmunstances, but i think it's just a state of mind, having saved for so long you dont really want to spend it all on debt.
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I think that you need to think in terms of delayed rather than instant gratification. No one is saying you can't have these things but you need to save up for them otherwise they are costing you more than the actual cost.

Think how much a 2000e holiday put on a credit card @ 18% & payed over 6 months is acually costing.

If you can save this up rather than spending it you not losing even more money.

Its it though at first to start to sort out debts, but its worth it once you get thru it.

Think what a pity it would be to frittle away all that hard earned money only to end up back in the same position that you were in.
 
ClubMan, the SSIA matures in april, so until then greenfly will be paying interest at up to 18% on 8.5K, for 4 months that could be 500 euro give or take.
 
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