Best Way To Sort Out My GF's Debt!!

Hi Guys,

Firstly, apologies this is not property related but I value your advice!

She has about 14k in a personal loan (Paying 14% interest with St George) from an engagement in a previously relationship gone wrong a few years ago. And about $1,400 in credit card debt (paying interest as well). She is not on a "huge" income and has been at her current job only a few months; but has worked full time for years. We are getting a copy of her credit record, but she believes its clean. She is potentially going to receive a small inheritance of about 10k this year.

What is the best way to sort this out? I'm going to build her a budget, and for me its about her learning the correct behaviours, but in the meantime I'm thinking of 2 potential options:

1. 0% Credit card transfer debt consolidation.

eg. Citi Classic - Balance Transfer & Rewards Credit Card - Citi or Low Rate Credit Card | Virgin Money Australia

Both like they accept personal loan balance transfers. Depending on the credit card approval amount, we could move as much of the combined credit card and personal loan debt and have it sitting at interest free for 15 months. I'm not a massive fan of this idea as it won't in-still as much behavioural change as she could "worry about the debt later" and once the interest free period ends, she would paying 21% interest on the credit card! The inheritance is not 100% a given.

2: Refinancing and consolidating to a cheaper lender with no fees.

eg. Debt Consolidation or Personal loans product information or Variable Rate Loan

I'm thinking potentially this is the better option, as it will bring her debt all together and will enable her to save on interest and start to bring the debt down given that the inheritance is not a given.

Whatever option: I will enforce she cancel her credit card once an option is chosen above.

What products or advice do you have? Thanks for your help.

 

Www.barefootinvestor.com

 

I'm always in favour of the option with the least interest payable.

 

Great book, and I’ve started taking her though some of his stuff as to create “behavioural changes”.

 

As per responses on Whirlpool where you also posted this same question.

 

The granny flat was engaged?

 

I guess not everybody is on whirlpool... I'm not. So i do like the fact it's posted here. I can learn from people's answers!

Perhaps OPs GF needs to better understand the differences between wants and needs and how to identify which is which.

 

Maybe go through budgeting and saving? Moving the amounts owing around really is a band aid solution if she never gets her head around the concept of paying off the principal and interest rather than just the interest.

 

As a first step immediately start paying more than the minimum required (double, triple or more).

Then start the application for a zero interest card. Continue to pay 1/12 of the balance outstanding each month. The hitch is if she's late for one payment interest free stops.

Refinance to another zero interest card after interest free finishes.

DO NOT PUT ANY MORE ON A CARD.

 

Run as fast as you can. Noble thought to take on other people's issues but unless they change it'll keep on happening. If the lass hasn't already understood she is in deep do do's and altered her behaviour, then it's highly probable it ain't going to happen.

And under no circumstances go guarantor for her debts.

 

This comment particularly concerns me, as it looks very much like controlling behaviour for you to talk of "enforcing " a decision you have made.

Your girlfriend is clearly an adult and should be treated as one. Sure, offer suggestions, but in the end any decision should be hers to make.
Marg

 

Talk to your girl friend about your concerns and your goals e.g. do you want to have money to buy a house? have children? have a low cost (but beautiful) wedding. You might want to suggest you both try a "savings fast" to speed up paying off the debt. Find something to save up for to motivate your girl friend to save. Find cheap ways to reward yourselves and enjoy spending time together. Try and make saving a game.

 

1. Transfer debt to the least interest payable option.
2. Start saving and repayment at the same time!
3. Open a savers account like one of the CBA's. It gives you better interest rate if you don't touch the savings and accumulate a larger balance each month.
4. Repeat 2+3.
5. Education. However please do not force her to do anything.

 

cut up the cards.Then Concentrate on paying the smallest debt off first

 

Hang on a minute.

Not up to the boyfriend to cut up cards that don't belong to him.

No mention at any time of what the girlfriend wants to do. Surely she should get a say.
Marg

 

True!

 

I think she needs a higher/bigger goal for her money. She's in a debt rut.
Once she has a higher goal, she can focus on that aim and frivolous spending will more or less be out of the picture.

Paying down debt with slow progress and no endpoint in sight isnt fun. Perhaps charts (drawn up using Excel) could help her visualise when she will actually be out of debt, it gives her a goal and an endpoint.

But I think the drive needs to come from within her, and not so much come from external forces unless she herself has said it. Having it forced upon her... Hmmm... I think she would resent you.

 

i would be real care--full with the word enforce--because the road to hell is paved with good intentions and as some are able to run faster-some run slower ..If you intend the person in your life and it may well be for a very long time to make the Lady a budget --the further one gets from the realities of the world and utopian idea's ..

 

I suggest she records her spending for at least a month. That is she writes down, keeps in her phone or keeps receipts for everything. Everything.

Then categorise the spending, (adding in big items that may not have come up that month like car rego, repairs etc) then she can determine what changes she wants to make, what goals or patterns she wants to pursue.

She might consider catagories like long term savings (house deposit) and short term savings for holidays etc. One of her catagories might be debt repayment.

I don’t thinks it’s worthwhile transfering the debt. Disregard the interest rate and work on the smallest debt first. When that’s done re allocate that repayment to the next biggest debt etc. Doing it this way gives you small ‘wins’ and shows you the power of compound returns (reallocating repayments onto the next highest debt when the smaller debts are repaid)

Many people are happy borrowing for stuff. They find it easier or more convenient borrowing and paying a bit of interest than saving and earning a little interest. Horses for courses. Whatever works.