Nikki Ramskill was just 18 when she pulled out her first credit card shortly before starting medical school – despite having “no idea” about money.
By the time she reached her thirties, the now fully qualified doctor was £60,000 in debt and unsure how to settle her finances.
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 took time off work to travel that she realized “how bad” her debt had become.
She admits her five-month break only made her finances worse – but Nikki says it also gave 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 at home, including a flat she partly owned in London.
She had traveled through Australia, New Zealand and Southeast Asia.
“I was trying to pay my bills and I was also trying to pay for my trips. That’s when I realized how bad it had gone,” said Nikki, who is now 37 and lives in Milton Keynes.
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“I had always wanted to travel, so I really wanted to go, but being away gave me time to think. I panicked because I had no money coming in.
“That’s when I thought ‘oh my god, this is terrible’. I was on a chance of a trip of a lifetime that I may never do again.
“As soon as I got home, I decided to do something. I was about 31 when I finished traveling.
“The highest level of debt I was incurred in was £60,000. I made my situation worse by traveling and being out of work for a while.
Nikki had previously tried using 0% balance transfer credit cards to clear what she owed, transferring her debt to an interest-free deal – but soon discovered she was no longer accepted for these cards.
Generally, only those with the best credit ratings are accepted for 0% balance transfer credit cards.
After her travels, Nikki then tried to settle her debt using the snowball method – this is when you start by paying off the smallest of all your loans first, before moving on to the next largest.
The idea is that by paying off a debt, you’re more motivated to keep going.
But after moving from working in the hospital to training as a GP, Nikki found her salary had dropped by around £1,000 and said she was no longer able to pay her reimbursements.
That’s when she decided to talk to her bank about a debt consolidation loan and find out if it would be right for her.
A debt consolidation loan involves taking out one loan to pay off all of your existing debts. So, instead of making many refunds to different companies, you only make one refund per month.
Nikki said it was the second time she tried to consolidate her loan, as the first time “didn’t work out” as she continued to spend 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 cut my payments in half. The other good thing was that the interest rates I was paying were much lower.
“My credit cards were at 11% APR and my loan at 6.2%. There were no arrangement fees or prepayment fees.
“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 this, you must eliminate all use of debt.
“I was lucky. I was in a good job and spoke to a risk bank manager in person. It’s not for everyone.
It took Nikki around five years to pay off £60,000 in debt. At the time, she was earning around £2,800 a month.
She paid back £10,000 through the snowball method, around £40,000 through her loan, and then the remaining £10,000 was left to her by her father who sadly passed away.
Nikki says learning how to manage her money using Mettle, a free digital business account from NatWest, has also been crucial to her success in building up her finances.
Debt consolidation loans – the pros and cons
Before opting for a debt consolidation loan, the first thing to check is whether you can reduce the costs of your debt in another way.
Nikki says she was no longer able to take out a 0% balance transfer credit card, but if that’s an option for you, it will be a cheaper way to settle your debt.
The idea of a debt consolidation loan is that it can help simplify your finances, so you don’t have to keep up with lots of debt – but it’s not for everyone.
For some people, this may mean that you are able to consolidate a number of expensive debts into one loan at a lower rate, so you spend less on interest each month.
But high fees can also apply, especially for those who want to make early repayments, says Sarah Coles, senior personal finance expert at Hargreaves Lansdown.
“You have to check the costs carefully. Some of these loans will spread out the repayments longer to make the monthly payments more affordable, but that means the interest goes up,” she said.
“Some debt consolidation loans will be secured by 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 the termination fee for an existing loan agreement – and if there are any prepayment charges. This may not be an option at all if you have a bad credit history. “
Ms Coles also points out that you can sometimes end up with just one unmanageable payment, which won’t leave you any better off than before you took out the loan.
You should always seek free debt advice before taking out a debt consolidation loan, to make sure it’s the right path for you and to understand how much you’ll be paying back and for how long.
Three tips if you’re in debt and struggling
Nikki, who now runs her website The Female Money Doctor to help inspire others in debt, offered the following advice for anyone struggling:
- Tell someone ASAP: “My other half knew about my debt but didn’t know the extent of it,” Nikki said.
- Talk to a Free Debt Advisor: “There’s no shame in talking about money.”
- Don’t procrastinate: “Get help and decide quickly what you want to do.
There are free organizations that will help you clear your debt:
Always be wary of companies that try to charge you for debt help, as you can get advice without paying a dime.