Debt management

Hi,

I need some advice. I have 4 oustanding loans all of which I keep serviced on a monthly basis.

They are as follows:
GE Money 12500 13.5% APR - I pay 455 monthly into this
Bank 5500 10.9% APR I pay 137 monthly into this
Credit Union 6000 interest included I pay 355 monthly into this
Credit Card 6800 12.9% APR I pay variable amount 150-300 monthly into this.

I hope to step on the property ladder after I pay off all of the above which means pulling in the belt for 18 months.

I earn 31500 and have saveing of 2000 in CU(Tied to loan Unfortunately) and my SSIA is due at end of April which will reap me 11500.

I want to use my SSIA to pay off some of the above debt and try to accumulate the rest in some way to reduce the interest.

Can anyone suggest how I should go about this. At the moment my loans would actually cover a mortgage payment on a pretty decent house!!

All advice greatly appreciated.

Broke Again!!

brokeagain said:

I earn 31500 and have saveing of 2000 in CU(Tied to loan Unfortunately)

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It makes no sense to be saving while maintaining this level of debt. Savings (including CU savings) should really be used to reduce your debt burden in my opinion.

What about transferring to a 0% CC offer if possible to give yourself some breathing space with regards to CC interest?

I want to use my SSIA to pay off some of the above debt and try to accumulate the rest in some way to reduce the interest.

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Most expensive debts first. It's not clear how expensive the CU loan is especially if you need to factor in the cost of maintaining savings/shares while borrowing from them.

Have you contacted MABS? Have you read the debt management/budgeting resources at the top of this forum?

Broke Again!!

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Does this imply that you have gotten into debt before? If so they you probably need to address the fundamental budgeting/spending issues that are causing you to live beyond your means.

You cannot withdraw CU Shares (not savings) if you have O/S loan with them AFAIK?

MABS only really help if somebody is in bother making repayments. OP appears to be making monthly repayments so there is little they can do for them.

Pay off dearest debt first with all of SSIA, increase CU loan if possible (4 times X 2000= 8000) to pay off some some dear debt, IMO

Welfarite said:

You cannot withdraw CU Shares (not savings) if you have O/S loan with them AFAIK?

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Probably not. One of the major drawbacks of the CU is that they insist on you saving with them while carrying debt which is usually not in the best interests of the individual and obfuscates the true cost of credit from them.

MABS only really help if somebody is in bother making repayments. OP appears to be making monthly repayments so there is little they can do for them.

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I thought that they would also advise people who are in this position even if they are making repayments?

Pay off dearest debt first with all of SSIA, increase CU loan if possible (4 times X 2000= 8000) to pay off some some dear debt, IMO

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This only makes sense if the cost of CU debt (including the cost of keeping money in shares/on deposit) is less than all the other loans and we don't know if this is the case and ascertaining the actual total cost of CU credit is very difficult.

Hi,

Thanks for reply. I was thinking of paying off the GE loan first as the Interest rate is 13.9& APR. This is my biggest loan 12500 but if I pay off now I get a reduced settlement amount which was 11500 the lst time I checked. GE are charging me approx 140 in interest per month so while I am paying 455, only 315 is coming off the loan.

I rang MBNA and managed to get balance reduced to 12.9%. I tried top apply for a 0% balance transfer but got declined. I never miss payment so couldn't understand this. Does the amount I owe have an impact on getting another CC?

Is there any institution that would consolidate all my loans?

Thanks for advice.

brokeagain said:

I tried top apply for a 0% balance transfer but got declined. I never miss payment so couldn't understand this. Does the amount I owe have an impact on getting another CC?

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Most likey yes.

Is there any institution that would consolidate all my loans?

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Not sure but normally such consolidations are done onto a mortgage to avail of cheaper credit (and ideally over a similar term as the original loans rather than over the full term of the mortgage). Debt consolidation may be possible here but I doubt it and even if it is you need to carefully crunch the numbers to ensure that it is in your interest to do so.

Also check in case any of your debts have hidden gotchas such as penalties for early redemption.

No easy solutions in this case I'm afraid.

ClubMan said:

One of the major drawbacks of the CU is that they insist on you saving with them while carrying debt which is usually not in the best interests of the individual and obfuscates the true cost of credit from them.

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It's down to the discretion of each CU board. In all cases it's not necessary to have or maintain savings whilst having a loan with the CU.

Sorry - I should have said that "in general" they insist. That is my understanding anyway.

ClubMan said:

Sorry - I should have said that "in general" they insist. That is my understanding anyway.

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It's a typcial CU thing to be honest, if they know you etc.. they have no problems providing a loan without savings.

I also thought Mabs would give give advice on money management and debt consolidation. It's been many years since I took a loan from the credit union but at that time they said to pay 'something' into savings even a tenner. This no longer seems to be the case. What is the CU rate of interest.

From the figures given above, I'd basically pay off the highest first. Use SSIA to pay off bulk of GE money loan, this will free up 455 pm for you. I'd use this amount to pay down the credit card. Then I'd tackle the bank.

The other view to take is that if you want to buy a property, lenders will take all loans into account when deciding what amount they will lend. The credit unions (most of them) do not lodge credit reports with ICB and that's why I've left them last on my list to pay off.

Have you approached the bank to see if they'll consolidate all loans for you? I'd also approach the credit union and ask them to drop the amount you pay into savings and up repayments on the loan. When the balance of loan and savings equal pay one off the other. At least they used to allow this.

Bluetonic said:

It's a typcial CU thing to be honest, if they know you etc.. they have no problems providing a loan without savings.

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They'll give a loan without savings as you suggest above, but then they'll insist you save while you repay the loan.

Thanks for all your advice. Much appreciated. I would like to have all my loans cleared before applying for a mortgage. This will ease the pressure off myself too

I will go with your advice and pay GE first then tackle the CC.

I have learned my lesson this time. Over spending to keep up with the Jones is silly. I have been sticking to a strict budget for the past 12 months. I am just looking for a faster way to pay off existing loans and prepare my self for the budgeting when I have a mortgage.

Thanks again.

Welfarite said:

MABS only really help if somebody is in bother making repayments. OP appears to be making monthly repayments so there is little they can do for them.

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I dont agree with this statement.

You have nothing to loose by contacting MABS. Its a free confidential and independant money advice and budgeting service.

Yes, I may have been hasty in dismissing approaching MABS as an option. My mistake, guys! Have a look at www.mabs.ie for more information