Sorting out debt as a graduate.
Discussion
So. to the PH collective. I came out of uni and was horribly in debt - the usual 3k overdraft and about 500 on a credit card.
Moved into a 'gain experience but get paid nowt' job, which kept me breaking even, with the aid of a little 'wheeler dealering' as my dad calls it. Unfortunately the bank doesnt recognise the reality of graduates not earning fortunes instantly and now charges me about £20 a month for the privilege of having such a large overdraft, and I pay about £30 on the credit card each month.
Now into a job that will allow me to start repaying my debts at realistically, the rate of about £200 a month. So do I pay it off bit by bit but still incur increasing interest charges (bank continues to increase interest rates on each year after finishing uni), or do I try to get a loan to pay it off now?
Other factors :
1. Dismal credit rating due to said overdraft and forgetfulness of credit card payments (improved of late)
2. If i pay off each month without 'having' to ie not with a loan, chances are i might end up spending the money on car stuff or something.
3. I like the idea of not having such a painful looking bank balance, even if its just because I have a loan.
From what I can figure, paying off at the rate of £200 a month, if I did it every month without fail, would have me clear in a shade over 18 months (gulp). In that time I would be paying about £400-450 in interest.
My own feeling is to go for a loan given my lack of self discipline when it comes to not spending money on toys. I suspect that this would probably be about 50 odd quid more expensive in terms of overall cost.
Wiser people than I, I summon thee! Command me!
Moved into a 'gain experience but get paid nowt' job, which kept me breaking even, with the aid of a little 'wheeler dealering' as my dad calls it. Unfortunately the bank doesnt recognise the reality of graduates not earning fortunes instantly and now charges me about £20 a month for the privilege of having such a large overdraft, and I pay about £30 on the credit card each month.
Now into a job that will allow me to start repaying my debts at realistically, the rate of about £200 a month. So do I pay it off bit by bit but still incur increasing interest charges (bank continues to increase interest rates on each year after finishing uni), or do I try to get a loan to pay it off now?
Other factors :
1. Dismal credit rating due to said overdraft and forgetfulness of credit card payments (improved of late)
2. If i pay off each month without 'having' to ie not with a loan, chances are i might end up spending the money on car stuff or something.
3. I like the idea of not having such a painful looking bank balance, even if its just because I have a loan.
From what I can figure, paying off at the rate of £200 a month, if I did it every month without fail, would have me clear in a shade over 18 months (gulp). In that time I would be paying about £400-450 in interest.
My own feeling is to go for a loan given my lack of self discipline when it comes to not spending money on toys. I suspect that this would probably be about 50 odd quid more expensive in terms of overall cost.
Wiser people than I, I summon thee! Command me!
Having seen this first hand the year before last - I would advise you to pay a comftable amount monthly to your debtors by direct debit/standing order. Else you will be inclinded to increase debt and/or spending on a credit card above and beyond your monthly income...if you see what I mean.
Somehow I seem to have avoided the worst of it. Instead of gobbling up my loan, I separated it carefully into what I'd need, and put the surplus in a high-interest ISA. As a result, I now have nearly £4k in savings and probably only about £5k of debt.
And avoid credit cards like the plague unless you're a millionaire or something and can afford to spend money you don't actually have. I always say replace the Bank parlance 'credit' with 'debt' and you'll see why you keep breaking even rather than making any money. If any deal demands that you have a credit card, back out of it. If any telephone/internet transaction demands you use a credit card, go round with a pocketful of cash demanding to speak to the manager - it really cuts through paperwork and gets things done quicker.
Any credit agreement through a bank will be set up to cost you in some capacity (always keep remembering - banks are businesses and must survive so it's not like they're not going to take advantage of all that money lying around). Instead of standing orders for debt repayment, send them a cheque every now and then and you may even avoid any excess interest.
We'll all get through it, but I think getting a credit card and getting yourself into more debt whilst sorting out other debts is lunacy.
And avoid credit cards like the plague unless you're a millionaire or something and can afford to spend money you don't actually have. I always say replace the Bank parlance 'credit' with 'debt' and you'll see why you keep breaking even rather than making any money. If any deal demands that you have a credit card, back out of it. If any telephone/internet transaction demands you use a credit card, go round with a pocketful of cash demanding to speak to the manager - it really cuts through paperwork and gets things done quicker.
Any credit agreement through a bank will be set up to cost you in some capacity (always keep remembering - banks are businesses and must survive so it's not like they're not going to take advantage of all that money lying around). Instead of standing orders for debt repayment, send them a cheque every now and then and you may even avoid any excess interest.
We'll all get through it, but I think getting a credit card and getting yourself into more debt whilst sorting out other debts is lunacy.
v8thunder said:
"And avoid credit cards like the plague unless you're a millionaire or something and can afford to spend money you don't actually have. "
"If any deal demands that you have a credit card, back out of it. If any telephone/internet transaction demands you use a credit card, go round with a pocketful of cash demanding to speak to the manager - it really cuts through paperwork and gets things done quicker. "
"Instead of standing orders for debt repayment, send them a cheque every now and then and you may even avoid any excess interest. "
Sorry mate but despite your commendable good intentions IMVHO you're wrong on the above.
Chris, my suggestions, based on nothing more than a bit of common sense and my life experience (I was in your position too when I left uni, as were many of my mates).
First of all do your sums on your whole lifestyle. Where does your cash go? What can you cut out to get this paid off sooner? Can you really only afford £200 or can you find a bit more if you're hard on yourself (a few less beers, give up fags if you smoke etc)? Some pain now will be better taken than prolonging the mess.
If you can get one consolidate the debt into the cheapest loan you can find. Try the supermarkets and MotleyFool for info.
Pay off the credit card first as this will be your most expensive debt. Then either cut it up if you can't be sensible, or make damn sure that you always pay off the full amount each month. Set up a DD to pay off the minimum each month to ensure you never forget a monthly payment again if you do. Credit cards are very useful tools if you use them wisely and with discipline. Contrary to popular Daily Mail opinion, used sensibly they're a good way to transact safely on the net, for large purchases and to build up a good credit rating which you'll need in the future if you want to get a mortgage.
As for the bank overdraft - who do you bank with? Talk to your bank manager and see what can be arranged. If you don't like what he/she says talk to HSBC/firstdirect. I have been with them for the best part of 15 years now and will move my cash away from firstdirect when hell freezes over.
Don't panic Chris, be sensible and you'll clear that amount of cash no problem and soon be on an even keel.
>> Edited by S Works on Sunday 13th March 17:12
>> Edited by S Works on Sunday 13th March 17:13
Well, switching banks would help, but its kind of hard to find a bank that is thrilled to take over an overdraft and... thats it. Basically to switch banks id have to clear overdraft first, which I will do anyway as soon as I have it cleared.
Switching credit cards would possibly help, but primarily I doubt I could get a good one. secondary to that I dont want to have another credit card.
I say £200 because im looking at about £400 spare every month. At the moment I have £200 each month spare. That goes easily on cars etc, and I dont have much of a social life at the moment, something i would like to change obviously, so I cant consider lowering that at all.
General concencus is to pay off credit card then pay off a bit monthly then?
Switching credit cards would possibly help, but primarily I doubt I could get a good one. secondary to that I dont want to have another credit card.
I say £200 because im looking at about £400 spare every month. At the moment I have £200 each month spare. That goes easily on cars etc, and I dont have much of a social life at the moment, something i would like to change obviously, so I cant consider lowering that at all.
General concencus is to pay off credit card then pay off a bit monthly then?
lanciachris said:
Well, switching banks would help, but its kind of hard to find a bank that is thrilled to take over an overdraft and... thats it. Basically to switch banks id have to clear overdraft first, which I will do anyway as soon as I have it cleared.
Seriously, talk to banks mate - right now you might be skint and in a bit of a pickle but a good bank manager will be smart enough to realise that you could potentially be a customer for life and (depending on your chosen profession) potentially a good source of revenue in years to come.
You have nothing to lose but a few minutes of your time. Might just work in your favour.
lanciachris said:
Anathema to PHing though it may seem Chris, have you thought of selling a couple of your cars?
Get out! go on!
I dont own my cars, they own me.
OK. I think it's fair to say Chris that, on this site, we understand entirely. Just don't expect bank managers to.
lanciachris said:
So. to the PH collective. I came out of uni and was horribly in debt - the usual 3k overdraft and about 500 on a credit card.
I would agree this is not too much to get stressed about - you're not even trying..!
Overdrafts are usually at scary rates as well as most credit cards. Find out how much you are being charged for both of these.
Do not be afraid of credit cards as mentioned- they are a part of life and cleevr management of these can make things easier - the reality of course is that most people don't but credit cards don't screw people's finances up - people do.
In an ideal world I would say try and and apply for a 0% credit card and lump it all on there then pay off a chunk every month. WHen the 0% runs out then find another one and repreat as above.
Even though you think your credit is not very good, lenders may not as they seem to have a very cavalier attitude for a few years. Try it - they can only say no. <a href="http://www.moneysupermarket.com">www.moneysupermarket.com</a> is a good source of the best deals at the moment.
If you can't get a cheapo card, then for example example a two year loan at sensible rates has to be wortth investigating I think and I am sure you would end up saving a bundle on interest.
>> Edited by limpsfield on Sunday 13th March 19:50
>> Edited by limpsfield on Sunday 13th March 19:51
Ended up 12k in debt after dropping out in my 2nd year due to money t. It started at 4k when I left, and took out another two 4k loans to keep myself and my other half homed. We ended up losing our flat and living in my parent's caravan, then their office for a year. The main reason we couldnt find work is because neither of us drove. We have only been able to turn ourselves around after I passed my test and could drive both of us to work.
I think we are at around 9-10k and falling. Two of my loans have 40 months remaining, the other I'm paying the interest on but it has the lowest rate.
I think we are at around 9-10k and falling. Two of my loans have 40 months remaining, the other I'm paying the interest on but it has the lowest rate.
sadako said:
Ended up 12k in debt after dropping out in my 2nd year due to money t. It started at 4k when I left, and took out another two 4k loans to keep myself and my other half homed. We ended up losing our flat and living in my parent's caravan, then their office for a year. The main reason we couldnt find work is because neither of us drove. We have only been able to turn ourselves around after I passed my test and could drive both of us to work.
I think we are at around 9-10k and falling. Two of my loans have 40 months remaining, the other I'm paying the interest on but it has the lowest rate.
Blimey. I think I would have lost heart and become a dirty thieving pikey long before that.
You've got three cars... thats going to be taking up a lot of cash. Do you NEED three sets of insurance, tax, petrol, servicing etc a year?
I'm the biggest petrolhead I know, and I'm currently carless and in my third year at uni. I'm gagging to drive again, but I just can't afford to own a car at present.
I've got the normal student loan (3x£3800...
) but nothing else luckily. Working a lot during the holidays has helped in the most part.
I've never had a credit card, don't intend to have one anytime soon. I generally spend what I've got, so if my bank account is low... i don't spend. Simple and has kept me out of financial problems quite nicely.
I'd recommend getting a low interest loan to pay off your credit card then CUT THE DAMNED THING UP!!! Use your switch card to pay for groceries etc. Don't get a credit card, they're evil!
I'm the biggest petrolhead I know, and I'm currently carless and in my third year at uni. I'm gagging to drive again, but I just can't afford to own a car at present.
I've got the normal student loan (3x£3800...
) but nothing else luckily. Working a lot during the holidays has helped in the most part. I've never had a credit card, don't intend to have one anytime soon. I generally spend what I've got, so if my bank account is low... i don't spend. Simple and has kept me out of financial problems quite nicely.
I'd recommend getting a low interest loan to pay off your credit card then CUT THE DAMNED THING UP!!! Use your switch card to pay for groceries etc. Don't get a credit card, they're evil!
Get a cheap loan to bring your overdraft within the 0% rate i presume you're getting as a graduate, and to clear your card. Cut up your card, and set up a standing order to make sure that every month you are playing a comfortable amount into your overdraft to bring it down. This coupled with your loan repayments will mean you can keep your credit rating and your chin up, and enjoy life after uni, and not worry yourself about your debt. Everyone has it, it's just a matter of being sensible and not too rash. Also if you have savings it might be worth using these, as why save when you owe?
All the best
All the best
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