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havana

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Two questions if I may...

1) May sound stupid but can I cancel my Credit Card while I am at my limit or do I need to wait till I have it cleared?

2) At the moment I am finding it really hard to manage my finances. A few figures:

Monthly income e2030
Credit union loan balance e5500 paying back e80 per week
Bank loan e1625 paying e81 per month
Credit Card balance e1500
Ph about e70 a month
VHI e38
I also have to pay e20 a month for a purchase I made and stupidly didn't pay it of in the interest free period.

e700 goes into our joint acc for mortgage, ins, bills etc.

Overdraft e600
Save e100 SSIA each month
And e80pm into the CU

My question really is would I be better off consolidating these debts? Would anywhere do this for me based on the debts?And do things look as bad as they seem to me? I only ever have about 80 a week disposable income, before anything extra comes out such as doctors bills or anything else unexpected. I can't even afford to be sick!!! Thanks in advance
 
Hi Havana - You can certainly cancel your credit card now. If you are having difficulty controlling your spending habits, this might well be a good idea.

The decision on consolidating your loans really depends on the interest rates you are paying. It is likely that the highest rate you are paying is on your credit card account, next highest on your overdraft, next highest your credit union and next highest your car loan, but you would really need to check the APR figures to confirm this.

Personally, I don't think it makes sense to be putting savings into your SSIA account while paying out interest on credit cards or overdraft. I'd suggest you freeze your SSIA contributions and redirect this money to your credit card account until it is cleared.

You will find some useful advice on budgeting and getting out of debt on MABS.ie.
 
Thanks for the reply.
What sort of effect would this have on the SSIA in the longrun?

If memory serves the CC is 16.9% and the OD around 10.5%. But would have to check. Really should know!!

I have e3650 shares in the credit union. Should I use this? I hate the thought of no savings.
 
The real question isn't 'how will it affect my SSIA' - the real question is 'how will it affect my overall finances'.

Your SSIA is probably going to return you something like 7%-9% on your investment. You are losing way more than thsi (16%) on the interest payments on your credit card. So your overall financial position will be improved by redirecting future contributions from your SSIA to your credit card.

I'm not recommending that you withdraw the money that is already in your SSIA, so there is no impact on the Govt contributions that you have already received.
 
Monthly income 2030 (Savings CU 3650, SSIA)
Transfer to joint account 700/month
Phone 70/month
VHI 38/month

Leaves 1222 per month

Loans
CU balance 5500 repayment 80/week=240 pm
Bank loan 1625 repayment 81/month

Leaves 901 per month

Credit Card balance 1500
Purchase 20/month
Overdraft 600 (10.5% interest)

Monthly savings
SSIA 100/month
CU 80/month


Hi havana,

Just a personal opinion, but this is what I would do:

1. Send back (or at least stop using) the credit card

2. Take 1500 out of your CU savings and pay off your credit card bill. This leaves 2150 in your CU (40% of your borrowings) It also frees up the amount you would be paying on the credit card bill each month and saves you punitive interest.

3. Talk to the credit union about whether they would let you take another 600 out of your savings to pay off your overdraft. This would leave 1550 in the CU savings, 28% of your borrowings. Most CUs will allow loans of 3 times the amount of your shares and this isn't far off. They really should let you do this, too. If they do let you pay off the overdraft, cancel it (or at least don't use it). This saves you interest and bank charges.

3. Stop saving the extra 80 per month into your credit union; put it all towards paying off whichever remaining loan has the highest rate (whether this is your CU loan, bank loan or the purchase agreement).

4. Don't worry about the savings thing. You still have 1550 (at least) in the credit union and also your SSIA will be matured in 3 years or so. I personally would keep paying into the SSIA. That way you are still building up something for yourself.

The new sums are :
Monthly income 2030 (Savings CU 1550, SSIA)
Less joint account 700/month, phone 70/month, VHI 38/month, SSIA 100/month

Leaves 1122 per month

Loans outstanding
CU balance 5500 repayment 80/week=240 pm
Bank loan 1625 repayment 81/month
Purchase 20/month
Credit Card balance nil
Overdraft nil

Leaves 781 per month.


Of course, it always looks a lot easier on paper than it is in real life.

Good luck with it.

ted
 
Thanks a million. Will print that out and have a proper look, see how it adds up. Don't think I could cancel OD cos it would mean I couldn't meet all my outgoings that month. But I could possibly decrease it by 100pm.

Thanks again. Much maths to be done!!
 
RE: temporary cash flow problem

Hi Havana

I would tend to do the following if I were in your shoes
You have the following 5 loans outstanding

Credit union loan balance €5500 paying back €346 per month averaged over the year.
Bank loan €1625 paying €81 per month
Credit Card balance €1500
loan€20 per month
overdraft €600

You have savings of €180 per month (SSIA + CU)

My strategy:

Find out the minimum amount you have to keep in you CU share a/c. Withdraw what is not needed.

Use this to immediately pay back the Back loan of €1625. Straight away you can save €81 per month. One loan is cleared - only 4 to go.


I would stop saving into the SSIA and the CU for the rest of 2004 this will free up €180. Do not cancel the SSIA - just stop paying into it or pay the minimum sum. With the additional €81 per month you now have €261 to pay off your credit card. You will have your credit card balance cleared in less than 6 months. You now only have 3 loans to clear.

We are now in June - only a couple of months away!

Now, you will pay €346 + €261 + (what you would normally have paid each month on your credit card (you didn't say) - to pay off your credit union loan. By the end of the year, you will probably have cleared most of your CU loan + your O/D. Can you exit your €20 per month loan easily?

Ok! Now We are in January 2005. You will recommence your savings. You will increase the amounts which you originally saved placing the Max to the SSIA.

In 2005 all will be brighter.

Good luck with whatever decision you make. And don't forget to treat yourselves every now and again!

Marion :hat
 
Re: RE: temporary cash flow problem

Even if you can't cancel your credit card while you owe money you should consider cutting it up or freezing it in a block of ice as some people recommend in order to avoid the temptation of spending on it again.
 
Re: RE: temporary cash flow problem

You can close your credit card account even while there is an outstanding balance. You can then pay off that balance in the normal way, i.e. pay as much as you can when you can.
or transfer the balance to another provider.

You'll keep getting statements as long as you have an balance outstanding.

When the CC tax kicked in I had about €300 balance. I closed the account leaving the balance on it, and then I cleared the balance the following month. I avoided the tax even though I had a balance on my card.

If you are closing the card account, do it before the end of march. No point adding another €40 to your debts.

-Rd
 
Havana

Rank your debts according to the most expensive. Probably as follows; Credit Card, CU, Overdraft + Bank Loan.

Consider reducing your CU balance to 25% of the shares you currently have(this is a reasonable figure from my experience of CU and it keeps nearly a grand in shares there ).

Use this cash, over €2,500 to pay off the Credit Card and the overdraft. Use the balance to pay off some of the bank loan/credit union, whichever is charging the highest rate. Consolidate these two loans into one, obviously at the lower of the two rates. I favour CU even if it is slightly dearer but that is because I am involved in one but even I would not pay CU more than 9% pa.

Good luck and stop worrying.

Slim 8)
 
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