Has anyone ever gone through the 'im in a financial mess credit card company' process

looperman1000

I am asking you guys here for advice.

I have had a credit card debt for some time, the same debt, minimum payment always being paid off like clockwork. Sometime i might go over credit limit, but get it back under. It's like a noose around my neck, a black cloud that never goes away.

I have just acquired a loan and want to clear the credit card. It is just at the 6k mark.

I have 2 options....pay off 95% to the credit card company and they will close the account, and this doesn't affect credit rating.

Or...i can go through the process of saying i need help to close this account and am willing to pay x amount to close this account. I will have to show them income and expenditure etc etc to show i am struggling, and this will possibly affect my credit rating for up to 5 years.
The problem is, because i have had this debt for so long, i think my credit rating is utter crap, despite my bank who i have been with for the best part of 15 years, usually never refusing me a loan.
Forgive my ignorance but i don't know the system when it comes to credit ratings, etc

Has anyone any advice for me? Been through this process?

Thanks v much in advance

GerardKeating

looperman1000 wrote: »

pay off 95% to the credit card company and they will close the account, and this doesn't affect credit rating.

Never hear of this option, which provider is this with ?

looperman1000

I actually heard about it...or got the idea from hear on boards. They were mbna they are called avantcard now

GerardKeating wrote: »

Never hear of
this option, which provider is this with ?

blondchick

If your bank has never refused you a loan it is actually unlikely that you have a bad credit rating. You can get a copy of your credit rating by logging onto the ICB website, you need to apply for it and there is a charge of about €6. While this debt has been with you for a long time once you are keeping the minimum amount paid every month from a credit rating point of view you are staying under the radar. You just need to be 100% sure that the 95% option will not affect your credit rating as if it does it will stay on your record for five years.

JigglyMcJabs

Use the loan to pay off all of the credit card, at least with the loan repayments you'll be making a dent in the principal.

When you apply for any loan in the future, including a mortgage, there's a question in the form that asks if you have ever settled or come to an arrangement with a previous creditor, it's best to be able to honestly answer no to that question.
For the sake of saving 5% it's probably best to be safe!

looperman1000

Appreciate guys. More I think about it. I think I'll go for the 95% option. I'll double check that it doesn't affect credit rating and ill go onto ICB now.

Thanks v much

JigglyMcJabs wrote: »

Use the loan to pay off all of the credit card, at least with the loan repayments you'll be making a dent in the principal.

When you apply for any loan in the future, including a mortgage, there's a question in the form that asks if you have ever settled or come to an arrangement with a previous creditor, it's best to be able to honestly answer no to that question.
For the sake of saving 5% it's probably best to be safe!

Mezcita

looperman1000 wrote: »

I am asking you guys here for advice.

I have had a credit card debt for some time, the same debt, minimum payment always being paid off like clockwork. Sometime i might go over credit limit, but get it back under. It's like a noose around my neck, a black cloud that never goes away.

I have just acquired a loan and want to clear the credit card. It is just at the 6k mark.

I have 2 options....pay off 95% to the credit card company and they will close the account, and this doesn't affect credit rating.

Or...i can go through the process of saying i need help to close this account and am willing to pay x amount to close this account. I will have to show them income and expenditure etc etc to show i am struggling, and this will possibly affect my credit rating for up to 5 years.
The problem is, because i have had this debt for so long, i think my credit rating is utter crap, despite my bank who i have been with for the best part of 15 years, usually never refusing me a loan.
Forgive my ignorance but i don't know the system when it comes to credit ratings, etc

Has anyone any advice for me? Been through this process?

Thanks v much in advance

The problem is, and I don't mean this in a bad way, that you are a credit card company's dream customer. In that by paying only the minimum balance each month they get to hammer you on the interest over a prolonged period of time and therefore make lots of money out of you. Therefore I don't think they would even consider giving you the option to come to some sort of a deal about the overall amount.

Credit ratings are affected by people missing loan payments, payments on mortgages, etc. So it's actually good that you have not missed any minimum payments on your card and that's the reason that your bank has continued to offer you loans.

So two options as I'm not sure if you have drawn down the loan yet.

1. Use the loan to pay off the card. Use that to pay off the card debt. You would obviously still have the debt but the rate on the loan would definitely be better than the one you are paying on the card.

2. Switch the debt to another card. This is something where you must to have a large degree of financial discipline but it is a way of attempting to clear the debt without paying massive interest while you do it.

Basically all of the major card companies offer deals to get people to switch credit cards to their ones. The encourage people to do this by offering low introductory rates (usually 0% for about six months). These rates then go up to normal rates after than introductory rate ends. I presume that the idea is that people will switch their debt to a new card and continue to spend on the new card without worrying about the overall amount they owe. They then end up building up more debt over time.

But the right thing to do is to switch the debt to a new card and then immediately tear up the new card. Literally don't give yourself the option to get into any more debt. Then begin making regular payments on the debt. Before the introductory period ends, you switch the debt again, which will give you another six months grace with a different provider. This way you are paying off the debt but not paying huge interest on the overall amount.

Full list here of up to date introductory offers here:

http://www.moneyguideireland.com/credit-card-offers

By being a "good customer" other credit card companies would definitely consider your application to switch the debt. But as I said, you have to discipline yourself to pay off the debt and to move it again at the right time.

Concept is discussed at length here:

http://www.moneysavingexpert.com/credit-cards/balance-transfer-credit-cards#rule1

Credit cards are subject to a stamp duty charge of €30 every April. Therefore when you switch make sure you get a letter from the card provider at that time indicating that you have paid it.

Key thing is to pay off the debt but in a way where you are not being hammered with high interest rates.

Best of luck.

looperman1000

Thanks Mezcita. Really appreciate you posting! I did contemplate at one stage to switch the 6k debt to another card and do as you say, pay it off without the added pressure of the interest. At the moment, i have the 7k sitting in my account. The bank, or my bank approved the loan within a single minute after i clicked the last submit button.

I am pretty totally clueless when it comes to these money matters.

Now i have that money, could i still switch the debt to another card...cut up the new card, and pay back the card and loan? Or is that just silly?

I did think about paying in a 100 or 200 into a credit union every week out of the 7k loan money and building up some saving history in order to get a cheaper APR loan with credit union also?

Mezcita

looperman1000 wrote: »

Thanks Mezcita. Really appreciate you posting! I did contemplate at one stage to switch the 6k debt to another card and do as you say, pay it off without the added pressure of the interest. At the moment, i have the 7k sitting in my account. The bank, or my bank approved the loan within a single minute after i clicked the last submit button.

I am pretty totally clueless when it comes to these money matters.

Now i have that money, could i still switch the debt to another card...cut up the new card, and pay back the card and loan? Or is that just silly?

I did think about paying in a 100 or 200 into a credit union every week out of the 7k loan money and building up some saving history in order to get a cheaper APR loan with credit union also?

No problem at all.

From the look of it you could cancel that loan from the bank. This is from Bank of Ireland's loan terms. Presume that the other banks have to abide by the same rules:

"What is the Bank of Ireland (UK) personal loan cooling‐off period?  
You will have a 14‐day cooling‐off period during which you can cancel your Bank of
Ireland (UK) loan agreement.  This will start from the date you sign your loan
agreement or when you receive a copy of the agreement, whichever is later. If you
cancel, you have up to 30 days to repay the capital and interest.  "

Best ring them to find out. Make sure there are no penalties for cancelling as the last sentence from the blurb above makes me think that there might be.

But assuming you can't cancel the loan, it would be best to pay off the credit card debt straight away. Easiest way to look at it is which loan has the highest interest rate? The higher rates should be cleared first. So as of today you have a credit card debt where the rate is probably over 16%. While the bank loan rate is probably in the region of 7.5%.

There's not much point in saving while having outstanding loans hanging over your head. Because by overpaying the loan each month (assuming the bank allow it) that's how you really cut into the total debt and pay it off faster.

Paying off €6000 to a bank over five years at 7.5% means you will pay over €1100 in interest during that time.

If you can cancel the loan and go down the switching card route, you could pay off the debt in two and a half years by paying off €200 a month.

3DataModem

I would suggest paying the loan, as another card will lead to temptation later on.

Also paying off a term loan early only saves interest if the loan is variable rate; it doesn't apply to fixed rate loans.

looperman1000

Thanks once again for coming back to me Mezcita. I suppose i could cancel the loan and go the card switching route. The loan i got was for 1 year, so i was a little afraid of paying off the €155 a week, also, hoping it wouldn't suffocate me.
I hear you 3DataModem, i will be very good in the beginning and cut the card up, things get a bit tight, and ill say, ill just order a card in the event that i need it when things get too tight....are you looking inside my head???

The loan is with AIB and lending rate is: 12.380%
When i read the credit agreement it says 13.011%?
I can withdraw from the credit agreement within 14 days.
I guess i will have to ring them to find out if it affects credit rating to withdraw.
I was thinking of taking the 7k out over the 2 years to make things easier on me also, and paying off the 95% of the credit card

Oral Surgeon

looperman1000 wrote: »

Appreciate guys. More I think about it. I think I'll go for the 95% option. I'll double check that it doesn't affect credit rating and ill go onto ICB now.

Thanks v much

Whats all this 95% rubbish??!!
Pay 100% of the debt, you did spend it….
Be happy that you are now paying less interest instead…..

rainbowtrout

looperman1000 wrote: »

Thanks once again for coming back to me Mezcita. I suppose i could cancel the loan and go the card switching route. The loan i got was for 1 year, so i was a little afraid of paying off the €155 a week, also, hoping it wouldn't suffocate me.
I hear you 3DataModem, i will be very good in the beginning and cut the card up, things get a bit tight, and ill say, ill just order a card in the event that i need it when things get too tight....are you looking inside my head???

The loan is with AIB and lending rate is: 12.380%
When i read the credit agreement it says 13.011%?
I can withdraw from the credit agreement within 14 days.
I guess i will have to ring them to find out if it affects credit rating to withdraw.
I was thinking of taking the 7k out over the 2 years to make things easier on me also, and paying off the 95% of the credit card

I thought the problem was fairly straightforward reading the first few posts, but this just caught my eye. I think you really need to sit down and look at your maths, and income and outgoings.

In your OP you said your credit card has got a 6k balance on it and you are only able to make the minimum payment on it which I imagine is only keeping it hovering around that balance and not making any meaningful dent in the debt.

In this post you are talking about taking out a 7k loan from the bank and paying back in one year. 155 a week is 8060 over 52 weeks or approximately 670 a month. Can you afford that? Did you do the maths? And if you can afford to make these weekly payments why are you not making them to your credit card company to bring down the balance? Why is there a need for the bank loan if you can afford to make payments like this?

I'm guessing that the interest rate on the credit card is somewhere between 16-18%, and that your minimum repayment is between 2.5%-5% of the balance so you're probably making a minimum monthly repayment of €150-300 per month.

If you can barely afford this how can you afford €670 per month on a bank loan?

looperman1000

It's not rubbish Oral Surgeon, Avantcard have agreed to let me pay 95% of the total balance, which i have now done!
Yes i have now closed the credit card account after accumulating the debt myself. I am now paying it off at a lower interest also, if somewhat minimally. I don't shy away from the fact that it was me that ran the debt up over the years. I am quite happy to hold my hands up, i only came here for advice as to the best way to pay it off is all. So thanks to the more helpful folk on here that did that.

Thanks rainbowtrout, get completely what you are saying, i just think its good to have the credit card account closed and there will be no temptaion now with paying back the bank loan every week.
I should be able to afford it but it will be tight enough. It will be a lower interest which i am very happy about.

rainbowtrout

It is probably a good thing to get rid of the credit card if you have been using every time you made a dent in the debt.

I would suggest taking the loan over two years and give yourself a bit of breathing space so you don't leave yourself too tight. If you have a bit of money left over at the end of every week/month you could start a small savings account with your credit union so if anything does come up unexpectedly then you have funds to pay the bill. If your loan is variable and you have built up some savings then you could pay it off early say 18 months down the line if you were in a position to do so