Nikki Ramskill was just 18 when she pulled out her first credit card, just before starting med school — even though she “didn’t know” about money.
By the time she hit her 30s, the now fully qualified doctor was £60,000 in debt and didn’t know how to put her finances in order.
The money she owed consisted of credit cards, loans and overdrafts, and she had also received a £3,500 tax bill from HMRC.
But it wasn’t until Nikki decided to take time off from work to travel that she realized “how terrible” her debt had become.
She admits her five-month hiatus has only made her finances worse — but Nikki says it’s also given her the boost she needed to reassess her situation.
Nikki had around £10,000 in savings at the time but said it was nowhere near enough to cover her travel and bills back home, including a flat she partly owned in London.
She had traveled through Australia, New Zealand and Southeast Asia.
“I’ve been trying to pay my bills and also pay for travel. That’s when I realized how bad it had gotten,” said Nikki, who is now 37 and lives in Milton Keynes.
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“I’ve always wanted to travel, so I was dying to go, but the absence gave me time to think. I panicked because I had no money.
“That was the point where I was like, ‘Oh my god, this is awful.’ I had the chance of a lifetime journey that I would never do again.
“As soon as I got home, I decided to do something about it. I was about 31 when I finished traveling.
“The highest debt I had was £60,000. I made my situation worse by traveling and being unemployed for a while.”
Nikki had previously attempted to pay off her debt with a 0% balance transfer credit card, turning her debt into an interest-free deal – but she soon found that those cards were no longer accepting her.
Usually only those with the best credit ratings are accepted for credit cards with 0% balance transfer.
After her travels, Nikki then tried to get her debt under control using the snowball method — that’s when you pay off the smallest of all your loans first before moving on to the next higher one.
The idea is that paying off a debt makes you more motivated to keep going.
But after moving from hospital work to GP training, Nikki found her salary had fallen by around £1,000 and said she could no longer afford her repayments.
It was at this point that she decided to speak to her bank about a debt consolidation loan and if it would be right for her.
With a debt consolidation loan, you take out a loan to pay off all of your existing debt. So instead of making many repayments to different companies, you only make one repayment per month.
Nikki said this is the second time she’s tried to consolidate her loan, as the first time “didn’t work” as she continued to spend money on her credit cards.
“I cut up all my credit cards and didn’t use them because I didn’t trust myself. I had to go cold turkey,” she said.
“The good thing was that it halved my payments. The other good thing was that the interest rates I paid were much lower.
“My credit cards had an 11% APR and my loan was 6.2%. There was no processing fee or prepayment penalty.
“The downside is that people who have everything consolidated into their mortgage run the risk of not learning a lesson. If you want to do it, you have to pay off all debt.
“I was lucky. I had a good job and personally spoke to a bank manager about the risks. It’s not for everyone.”
It took Nikki around five years to pay off £60,000 worth of debt. At the time, she was making around £2,800 every month.
She snowballed back £10,000, around £40,000 through her loan and then the remaining £10,000 was left to her by her father, who sadly passed away.
Debt Consolidation Loans – The Pros and Cons
Before deciding on a debt consolidation loan, you should first consider whether there are other ways you can reduce the cost of your debt.
Nikki says she hasn’t been able to get a credit card with a 0% transfer balance anymore, but if that’s an option for you, it’s a cheaper way to pay off your debt.
The idea of a debt consolidation loan is that it can help simplify your finances so you don’t have a lot of debt to keep track of — but it’s not for everyone.
For some people, this can mean you can combine multiple expensive debts into one loan with a lower interest rate, meaning you spend less interest each month.
But there can also be expensive fees, especially for those looking to make early repayments, says Sarah Coles, senior personal finance expert at Hargreaves Lansdown.
“You have to consider the costs carefully. On some of these loans, repayments are stretched out to make monthly payments more affordable, but that means more interest accrued,” she said.
“Some debt consolidation loans are secured against your home. So if you miss payments, your home could be at risk. Debt counselors would never suggest taking out a secured loan to pay off unsecured debt.
“You should also check whether there are fees for switching from an existing loan agreement – and whether there are prepayment penalties. If your credit rating is poor, this may not be an option at all.”
Ms. Coles also points out that sometimes you can end up with a single unmanageable payment that’s no better off than you were before you took out the loan.
You should always seek free debt advice before taking out a debt consolidation loan to make sure this is the right path for you and to understand how much you would be paying back and for how long.
Three tips when you’re in debt and struggling
Nikki who now runs her website The Female Money Doctor to inspire other people in debt, has offered the following advice to those struggling:
- Tell someone ASAP: “My other half knew about my debt, but he didn’t know how much it was,” Nikki said.
- Speak to a free debt counselor: “There’s no shame in talking about money.”
- Don’t procrastinate: “Get help and quickly decide what you want to do.”
There are free organizations that will help you pay off your debt:
Always be wary of companies trying to charge you for debt help as you can get advice without paying a dime.
https://www.mirror.co.uk/money/woman-who-cleared-60000-debt-27159712 A woman who broke £60,000 in debt in five years shares three tips to get your finances in order