Clearing credit card debt by borrowing against our French house

[Scooby]

[quote user="Théière"]

I cannot say whether a bank or building society will still lend to limited companies as the market has changed so dramatically,

[/quote]

A loan to a company would be classed as a commercial debt and carry premium rates of interest. 

[Russethouse]

[quote user="Scooby"]Théière, I completely agree - if you can replace unsecured debt with secured debt you will save a substantial amount on interest (provided you repay at the same or similar rate).  The only caveat would be to try to get an arrangement with your creditors to waive or reduce your credit card debt prior to consolidating and replacing with secured debt. IMHO it's a 'no brainer'.
[/quote]

 I agree in principal however look at the likely term (prob 5 - 6 years if the OP is hoping to retire at normal age) and also there may be arrangement fees to take into account, or possibly early payment fees.  ( Yes I know some lenders will let you keep paying a mortgage ad infinitum, but who wants to ?)

This debt seems to be being serviced, the OP hasn't talked about defaulting yet has he, or did I miss something

[Théière]

Scooby, thought that would be the case now, the good time are way behind us, or were they the bad times in waiting [;-)]

Quite true RH, No defaulting mentioned, just replying to Sunny's post

[Dug1]

Many thanks to all who replied and to explain the lack of response so far I'm currently laid low with a nasty flu virus and feeling really not up to deciding what's the best route to follow. Our circumstances are not as dire as it may have seemed from my post but we do need to protect the cushion of savings that we have as they're slowly but steadily being eroded. So no decision yet, we are considering all aspects of the advice kindly offered by you all and realise we must act before our hand is forced by being unable to pay bills. It really seems odd that it could be so difficult to raise around £15,000 to clear the high interest credit card balance that we can only pay the interest on when a secured loan on our house would have been at much lower rates with the possibility of paying off completely.I'm sorry if it came across as a stupid question, I think the disparity of views and advice offers belies that. 

 

 

 

 

[Russethouse]

Hope you feel better soon. We paid off a similar amount in the fashion I described but the problem is starting if funds are tight, as you actually have to pay more off one card.

It isn't as much money as I feared from your original post, and I guess you could pay that off via a mortgage before retirement, when you are feeling up to it do take a look at www.moneysavingexpert.com  you could be a 'debt free wannabe' http://www.moneysavingexpert.com/cards/

[Théière]

Likewise, hope you feel better soon. I don't consider it a stupid question, I faced considerably worse situations than yours 5 days a week for 8 years, yours should be easily sorted.

If I may offer one piece of advice stay away from one company who feature regularly at the various French expo's: Conti financial.

[tibbs]

I was in a similar position to you many years ago and consolodated my c.cards and loans in to one loan, over a longer period of time, which means lower monthly repayments. I know this method is more expensive than a mortgage, but may be simpler to arrange if your credit rating is still good.

Also, can you switch your cards to interest free period ones (moneysupermarket as mentioned is good for comparing these). Capital one and A&Liecester used to be good ones for this.

Whatever you do, you must cut up all your credit cards after you have consolidated the debt, otherwise you just start using them again and are back to square one

Good luck

[Renaud]

Doug

If you have any kind of private pension, when you are 60 can you take a cash sum from it to get rid of the credit cards?

[Mikep]

I still suggest that you need to do your sums very carefully if you're approaching retirement and expect (presumably) your income to be reduced. Failing to pay a mortgage promptly is a lot more serious than for credit cards, and banks in France will be much less sympathetic (if that's possible?). Before I retired I put all my income and outgoings for the next 25 years into a spreadsheet to make sure there was a reasonable chance of things working out - you can't predict exactly what will happen, of course (inflation, dotcom bust and credit crunch, for example), but it should give some idea of your safety margins.

One good thing about France is that the marginal rate of tax on pension income is low - 14% up to 50,000 euros per year for a couple - because you pay little or no socialist charges on this part of your income. However, the poor exchange rate is against you if your pension comes from the UK.

Good luck!

[mint]

I hope you're feeling better today; from your cold, I mean.

Reflecting on your problem, I do think there is some merit in talking to an impartial person (such as some of the organisations already mentioned) about your dilemma.

If nothing else, you'd have to go through your whole position with the person so that the situation can be examined in its entirety, and you yourself (on your own or with the help of said person) might then come up with a solution.

Sometimes it's hard to see the wood for the trees when you are thinking in circles.  All the very best.

[Chancer]

Wasnt the credit crunch caused in part by reckless lending/borrowing?

It has never seemed a good idea to me to consolidate credit card debts  (which are usually for things of the moment and not things that last a lifetime like bricks and mortar) and add them to mortgage which you will still be paying in 15-25 years.

I know many people though that have spent their entire life doing just this, they have serious problems at the moment with the exception of two who have tracker mortgages, the joke is that the banks and building societies are reluctant to repossess as they are in massive negative equity, the majority of their (re)borrowings have been frittered away on things that no longer exist like holidays, clothes, high living or cars, caravans, even houses in France.

I often ask myself who is the fool?

[Théière]

[quote user="Chancer"]

Wasnt the credit crunch caused in part by reckless lending/borrowing? Yes and the selling on of the risk in a similar way to a timeshare property being sold week by week.

It has never seemed a good idea to me to consolidate credit card debts  (which are usually for things of the moment and not things that last a lifetime like bricks and mortar) and add them to mortgage which you will still be paying in 15-25 years. In the case of the OP they may take the mortgage over 3-5 years and as said before they are not adding the credit debt to the mortgage, the credit debt will be the mortgage amount so saving a lot of money. Yes some people have added their credit cards to their mortgages and extended the term in order to re-finance to pay for the must have 50inch LCD tv but not in this case.

I know many people though that have spent their entire life doing just this, they have serious problems at the moment with the exception of two who have tracker mortgages, the joke is that the banks and building societies are reluctant to repossess as they are in massive negative equity, the majority of their (re)borrowings have been frittered away on things that no longer exist like holidays, clothes, high living or cars, caravans, even houses in France.

I often ask myself who is the fool?

[/quote]

[Weedon]

[quote user="Chancer"]

Wasnt the credit crunch caused in part by reckless lending/borrowing?

[/quote]

In part yes, plus the ability for some to buy two or more houses whilst many others have sweet F..A.

[cooperlola]

Moralising apart, could not the o/p get a mortgage against his French house from one of the French satelites of a UK or international bank?  Barclays, Santander spring to mind off the top of my head.

[sunny]

OP,

Hope you are feeling better now. 

I would advise you not to turn your unsecured debts into secured debts (via a mortgage).  There is really little benefit to you in the long run. 

You could be much better off by renegotiating the cc debt - you can try it right away while you are paying the interest or after 5 months of default  -  you could potentially get the interest waived, and might actually get a reduction in the capital amount. 

For you, this is a better outcome than shifting the debt to a mortgage, where you will have arrangement fees and interest to pay.  More importantly, you might face losing your house in the future, if you cannot keep up with mortage repayment.  Do look at your income stream in the future, once you retire, and realistically evaluate if you can afford the ongoing mortgage repayments then (remember, in a mortgage all the interest payments are front loaded, and you are barely repaying capital in the first few years).

I really can't believe that the cc companies or debt agencies will be able to get a lien on your France house.  But in any case, do talk to a professional about it to evaluate the risk (CAB, lawyer or accountant), before deciding on a course of action.

Best of luck, and hope it all works out well

[Théière]

Dug1, please ignore the questionable advice above.

Firstly there is a benefit to you as illustrated below, you will have to look at the fees payable to see if it would not be better via another route, possibly "rate tarting" I.E. transfering to a 0% credit card like Virgin's for 16 months then to another.

The only way you should re-negociate is by consolidation to another personal loan if not using a mortgage. DO NOT go down the default route, you will never know when you may need credit inthe future for an emergency and in todays market you will not get it! A default will haunt you and your credit file for years, a few years back loan companies almost ignored defaults but not now.

£15,000 loan over 5 years by example:

On credit card at 21% £405 pm total payable £24,348

Personal loan at 8% £302 pm total payable £18,129

Mortgage at 4.75% £281 pm total payable £16,881 + setup fees.

 

[Tony F Dordogne]

Dug1, get independent, free advice from the CAB or one of the charitable debt counselling agencies in the UK, far too much advice on here, some of which conflicts, you need to have some sensible advice from organisations that are wholly and totally dispassionate, not people giving advice for which they then have no responsibility.

[sunny]

[quote user="Théière"]

Dug1, please ignore the questionable advice above.

[/quote]

You are entitled to your opinion and I am to mine.  Doug is on a general France forum, so obviously he is not looking for professional advice here - I think we are all on the same page in telling him to seek professional advice from lawyers, accountants etc.  

However, I think it would be better for him to have a list of all options on the table - yes, including renegotiating credit card debt or consider filing bankruptcy - before deciding on a course of action.

Given the figures, if Doug can get a freeze on interest rates, then he can land up paying only £15,000 (or less) over time with NO interest, which is obviously better than a mortage and arrangement fees and interest.  And, most importantly, he will not have encumbered/compromised his nest-egg, the France house.  Yes, there is an impact on credit rating, but to be honest, when Doug retires in the near future, he will find it a lot harder to get new loans anyway.

If he decides to go the mortgage route then fine. But at least he should seriously consider ALL options and discuss these with a professional who is solely focused on acting in Doug's interest (note, this is not the same as impartial advisor, who will try to be fair to creditor and debtor)

[cooperlola]

Sunny, I have to agree - surely the point of asking this kind of question on a forum is to get a variety of ideas and opinions to inform the choice which is finally the o/p's?  Although personally, I'd go to the CAB - as I have second-hand experience of this which was good - I thought Dug specifically asked about mortgage possibilities against a French property (or maybe I've forgotten - it was so many pages ago). 

[Russethouse]

 My feeling is that the CAB is a great idea, however in my area at least there is a considerable waiting list to see someone, let alone a specialist, thats why I suggested Money Saving Expert: there is a wealth of info and advice there...but only the OP knows the full ins and outs of their own situation

[Debnfamily]

How much is this 'savings cushion' and what kind of interest is paid on it?  It seems silly keeping savings in the current climate when only a few percent in interest can be earned when credit card debt may be costing between 17 and 20% in interest.

Have you tried Virgin (changed from Alliance and Leicester as I think they may have stopped!) or Egg, both of whom offer to transfer credit card debt with an initial transfer fee of 2.5-3% and then give a year's interest free credit (as long as you don't use the card!)?

I don't think its easy to mortgage French property in the UK but I will suggest contacting Barclays, as I know they lend in France on French property based upon UK income so there might be a chance.....

Don't wait until you move to France, as though French banks will give you a mortgage based upon UK income, they won't let you use it to repay UK credit card debt, in my experience - though they will give a consolidation loan or mortgage to clear French debt, at a good rate compared to those given in the UK (6-8% unsecured and 3-4% secured, depending upon the term).

[Théière]

[quote user="sunny"][quote user="Théière"]

Dug1, please ignore the questionable advice above.

[/quote]

You are entitled to your opinion and I am to mine.  Doug is on a general France forum, so obviously he is not looking for professional advice here - I think we are all on the same page in telling him to seek professional advice from lawyers, accountants etc.  

However, I think it would be better for him to have a list of all options on the table - yes, including renegotiating credit card debt or consider filing bankruptcy - before deciding on a course of action.

[/quote]

Cooperlola, Russethouse, Sweet17 and Tony F your reasoned advice to go to the CAB, or Independant advisor, Consumer credit counselling service or Money saving expert is sound advise.

Sunny you are quite right too, better to have all the options on the table, don't forget the one where you fake you own death in a canoeing accident to claim on the life insurance  or filing for bankruptcy.

As you say Dug1 isn't looking for professional advice (obviously) so I am off

Teapot (MLIA Dip) FPC1,2&3 Cemap IFA (retired)

 

[sunny]

[quote user="Théière"]

Sunny you are quite right too, better to have all the options on the table, don't forget the one where you fake you own death in a canoeing accident to claim on the life insurance  or filing for bankruptcy.

As you say Dug1 isn't looking for professional advice (obviously) so I am off

Teapot (MLIA Dip) FPC1,2&3 Cemap IFA (retired)

 

[/quote]

I don't want to get into an argument with you here, as it is of no help to the OP.  But your comment on equating fraud, a criminal activity, with filing for bankruptcy is quite telling of your attitude.  It is this type of perspective that makes people feel ashamed of exploring a reasonable option that might be workable for them.  There is nothing dodgy or shameful in exploring or indeed declaring banckrupcy. And it is perfectly reasonable to try to protect your assests - note I suggested the OP speak to a lawyer or accountant - in your opinion, are these professions not qualified to help him understand the legal and financial implications of future courses of action? 

BTW, I am an economist with a PhD, so I don't know what our individual qualifications have to do with it.  But from my business background, putting up a £150,000 collateral (OP's France house) for a £15,000 debt is a bit daft.