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DEBTS OF DESPAIR; THE MONEY DOCTOR ...WITH FERGUS MUIRHEAD PS Financial worries or just looking for better value for money? Consumer champion Fergus Muirhead can help Coming up with the best way to sort out son's bad financial situation.

QOUR 42-year-old son is in a bad financial situation, owing in excess of PS13,000 to credit card and loan companies.

He has been offered a consolidation loan by a credit union, which would mean him paying back this loan over a seven-year period.

At present, he has PS5000 in Premium Bonds, which he's loathe to sell.

What advice could you give? Should he sell these Premium Bonds to reduce his total debt? If so, should he clear the items with the highest interest charge and perhaps switch his credit card debts to zero per cent offers on different credit cards to minimise his monthly outgoings? He has been in financial difficulty before.

Last time it happened, several years ago, my wife and I gave him enough money to clear his debts.

Unfortunately, he has not learnt a lesson and we are not in a position to help him this time.

Gordon Jones (name changed by request) ATHIS is a really interesting - and common - problem.

You don't say anything about your son's income and whether he has enough of a regular income to service his existing credit card debt.

And you don't say whether he is up to date with his current credit card and loan payments.

Having this information would allow me to give you a more specific answer but for the purpose of what follows, I will assume that all of his payments are up to date and that he is working and has some level of income.

Let's look at the consolidation option first of all.

It can be a good idea to pull all of your loans together into one, but it depends on the interest rate your son is paying on his existing loans, and the rate he is being offered by the credit union for a new loan. If the new rate is lower than the ones he is currently paying, then it would seem to make sense to move.

That said, the other issue that has to be considered is whether he is extending the term of the loans he has by taking out a seven-year loan.

If that is the case, then what he gains on the swings he might lose on the roundabout.

A lower rate of interest paid over a longer period of time might still result in a higher total interest payment but your son might find it more manageable if the monthly repayments are lower.

Your next question was about the savings he has, and whether he should use them to repay some of the debt. The answer to this is: It depends.

Not very clear, I know, but some people feel more secure if they have a level of savings in the bank for a "rainy day".

If your son used that money to repay his debt, then he would have no savings and might be tempted to get back into debt if he needed access to money quickly.

Having said that, it's likely that the rate of interest your son is receiving on his Premium Bonds will be lower than that which he is paying on his debt, so he would more than likely save money by using these savings to reduce his level of debt.

You ask about zero per cent credit and whether your son should transfer all of his existing credit cards to one offering zero per cent interest.

It's a good idea but sometimes zero interest credit cards are not quite as efficient as they are cracked up to be.

Many of them now charge a significant fee when you transfer - often about three per cent of the balance that is transferred.

And if your son doesn't pay off the balance before the end of the interest-free period and then has to transfer again, these fees can add up to more than the interest that he would have paid had he done nothing.

You mention that your son has been in this position before - and it is the case these days that more and more people are finding it difficult to keep out of debt once they have cleared it for the first time.

That might be a reason for going down the one loan route - if it meant that your son would cut up his credit cards after consolidating his debt.

That way, if he stopped using credit cards, he wouldn't be able to build up debt again.

Top tips ? Don't accept the first price you are offered in a garage when buying a new car. Always ask for a discount - or some extras.

? Always check out more than one comparison website before making a final decision on which insurance to buy.

Fergus is here to help Email your problems to Or post them to The Money Doctor, Daily Record, One Central Quay, Glasgow, G3 8DA Unfortunately Fergus can't reply to every question in person.


COMMON PROBLEM Many people struggle to keep out of debt. Picture: Image Source
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Title Annotation:Features
Publication:Daily Record (Glasgow, Scotland)
Date:Sep 29, 2017
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