I presently have:
- Credit Card, £2250 balance, interest rate of 17.43%
- Credit Card, £1500 balance, interest rate of 39.9% (3.5% min payment)
- Credit Card, £2400, interest rate of 34%
- Overdraft of £1300
- Vehicle finance, car value approximately £7995, £150 pcm
- Net take home pay of around £1320 pcm
£6150 in Credit Card debt, £7450 including the overdraft.
Obviously, the high interest cards were always a bad idea - but I didn't always have a high balance on those. I was briefly unemployed (without PPI would you believe it!), booked a trip to Japan last year and had a couple of incidences of poor fortune that led to me dipping in to those cards, and they've basically been maxed for around a year now. I am currently living with my girlfriend, I am the only driver in the relationship and I pay my share of bills and food etc. as well as my own costs for things like car insurance and petrol. By the end of the month I don't have an awful lot of disposable income, and I don't have a particularly exciting social life. Servicing the interest on these cards alone comes to around £220 each month, and is something I would desperately like to reduce.
When I have initially sought advice on this, I was somehow funneled towards groups trying to sell me on debt agreements, IVAs and so on. My understanding is that these can damage your credit history, and with my girlfriend wanting to start looking at saving for a house / deposit, I am reluctant to go down any roads that would jeopardize my chances of getting a mortgage in the short to medium-term future.
There are a lot of pre-eligibility tools out there these days, and most of them seem to suggest I'm not going to get any 0% balance transfer offers.
I have enquired about loans, so that I might consolidate some of this debt, and I have applied for one with the bank that I hold my current account with. I have been advised that I was turned down on affordability grounds. On checking my credit score, I have a score that is probably better than I expected - I never miss payments or anything like that - but they say my credit utilisation is high and so on.
One option open to me at the moment is that I am coming to the end of a Ford Options agreement, meaning I could give my car back to Ford, saving on the car finance and car insurance, and I believe this would settle the agreement on my credit file? The only downside I can see is that I would have new outgoings on public transport. And while my girlfriend says she is in favour of me doing this as a starting point, I am concerned that the lack of mobility will cause us frictions and problems in future. Having a car also affords me some options and flexibility with work that suddenly wouldn't be available. Sometimes I get some extra IT work that necessitates me driving for example.
I estimate that best case, this move would give me ~£152 pcm which I could put towards paying down the credit card balances.
Obviously I am looking at belt tightening and saving money on bills and things elsewhere, but I was wondering if anyone has ever been in a similar situation and if they adopted any particular strategy in attacking this sort of problem?
Is the £1500 balance with the 39.9% interest rate the obvious starting point here?
What are the prospects for improving my credit score in say the next 6-12 months enough to get a 0% balance transfer or loan for consolidation?
Is that realistic, or am I looking at a longer term struggle?
I'd just like to have a clear understanding of when I should apply for things again, and to give both me and my girlfriend a realistic time-frame on the bigger things.
Thank you for reading, even if there's no sure-fire advice