Fed up with Debt - Time to sort it out!!

osones · 11 April 2008 at 12:17AM

Hi all,

This is my first post and I thought I would start by getting straight in and ask your opinion on how best I can go forward to get out of debt.

I'm self employed, and although I can meet payments, it's starting to get tight as my work has gone a bit quiet so I want to hit it on the head once and for all!

I currently have the following debt:

- £7300 (the cost to pay off now) with a Natwest Loan
- £350 on a Natwest CC
- £2500 on RBS CC
- £1100 on VA Amex
- £1500 on Morgan Stanley CC
-

So I'm looking at around a total of £12,750 of debt.

My monthly incomings are around £1100.00.

Outgoing are around £700 a month:

- Phone @ £70
- Rent @ £220
- Bills @ £70
- Food @ £150
- Entertainment @ £60
- NW loan @ £215

I currently pay my loan at £215 pm although I have just reduced this by canceling the PPI which will reduce this by £50 a month (thanks Martin!!).

I guess my question is what is best option for managing my debt - is it worth me either refinancing my current loan with Natwest or search for a new loan elsewhere? Or is there a better option?!

I'm sure these questions get asked a lot, but it would be great to hear from people who have been in the same situation.

Because I get paid on invoice for my work, juggling multiple payments is always tough but at the end of the day, my debt is completely my own fault so I want to try my hardest to get myself out once and for all!

Many thanks in advance,

Oli

boredofbeingathome · 11 April 2008 at 1:00AM

Well done for posting and welcome to the board.
It is a tough one. My OH was self employed and made a bad decision to consolidate his debt.So i have a little experience of what you are going through.
I think you need to think carefully about budgeting. I can understand you are paid erratically, however you will still have fixed outgoings and i see that there is no provision for tax etc in your short statement. I would look at martins thread for a full SOA, it will give you a clearer picture of incomings and outgoings. Then you can identify problem areas where cutbacks can be made, or even if you are eligible for tax credits etc.
When all that is sorted, you may well find that the areas you can save in can be portioned off.
I used to sort out savings pots for, accountant, tax and NI. Separate ones for, general household and repairs. i know a lot of people find ways to stash a pot of money for emergency non payment (three months worth of funds)
The credit cards look relatively low amounts, so it would be useful to look at APR on these and look at balance transferring to better deals. There is a tool called the snowball calculator which could help you with this and give you a rough estimate of when these will be paid off.
from past experience of OH and him not looking at spending habits, it may well be worth you keeping a diary of spends-you will be surprised at how money is wasted, then use the demotivater tool which will show you how much you can save, but importantly how long it will take you to earn money spent.
Hope it all helps, it is a good position to be in when you get to grips with your finances-good luck. Bob x

TRUSt_NO_1_2 · 11 April 2008 at 1:07AM

Do you have wife or kids ?

osones · 11 April 2008 at 2:15AM

Nope, just myself. I live with my girlfriend in a house with others hence the fairly low rent (we share it between use 50/50).

To follow up some of the points from boredofbeingathome -

One of the credit cards (RBS) is on a 0% for thirteen months deal which is quite handy. However, I have applied for a few new cards with these offer but due to the SE status I don't get a huge credit limit (not enough for a single transfer). The last thing I really want is lots of cards with small amount on - it will make it quite difficult to keep tabs on!

My thinking behind the Loan was that it would lower my outgoing considerably so I could start putting something away each month.

angchris · 11 April 2008 at 3:19AM

hiya oli, welcome to mse...stick with us we`ll get you straight

rrrright first things first...you need to batten down the hatches, go through your monthly direct debits/expenditure one by one and get a better deal as a penny saved is a penny more to throw at your debt! you need to sort this out now because what happens if your circumstances change like you can`t work or your girlfriend falls preggers etc.
your phone bill is high..is this a moby? get a better contract or better still go payg if its a landline ring them up and barter a better deal.
food...is this just for you or are you feeding gf as well or are you both putting £150 into the hat? either way im sure there is room for improvement there, checkout the old style board for lots of really cheap recipes and help to get your food bill down.
your entertainment budget is going to have to be slashed to bare bones for the immediate future to help you get back on your feet.
as for your debts/loans check out the snowball thingumy and work out which is best to pay most to. don`t get any more credit or loans out you will just dig yourself a bigger hole, stop spending on the never never and use cold hard cash..only buy what you can afford to take in notes from your wallet, this is the only way your credit cards will reduce.
its going to take a bit of effort on your part but its so worthwhile, grab the bull by the horns and start watching those pennies...i`ve got faith in you...you can do it!!:D angchris xx

Bismarck · 11 April 2008 at 8:32AM

Hi,

Don't know what the snowball calculator would say but you've actually got a lot more than lots of people to throw at your debt every month. And you've not got kids which can really make it harder!

Yes, it;ll mean being tight on your money but you can sort this out without consolidating, just through snowballing your debts, one at a time and being mean with our money....look at it as being the first step towards saving for your deposit for a house...if you take a loan out you;ll just end up paying interest for longer and be lulled by a comparatively lower monthly payment into not hitting the issue head on.

Please...don't consolidate!!

osones · 11 April 2008 at 11:55AM

Thanks for such great ideas guys! I will start to look at the snowballing thing and cut back - my phone is for work so I get a little back each month but the other areas I can definitely improve on.

As a lot of your have said 'don't consolidate' - may I ask why not? I received a quote for £240 a month over 5 years (with my current provider Natwest - my current account are with them too). Although this seems a long time, paying off £2400 even at £50 a month would take around the same time wouldn't it?

I know I might be barking up the wrong tree but I always believe it's good to get both sides of the coin!

Cheers,

Oli

angchris · 12 April 2008 at 4:42PM

why do you think natwest are offering you a loan?? its to make money out of you!! sure it looks great because your immediate monthly outgoings are cut back but long term you pay them much more! if you keep getting loans out...you will never be free of them, if you concentrate on getting rid and paying off what you have already got then they will disappear one by one and the sense of acheivement is fantastic as you know that your future is going to be secure as you dont have to find the money to pay for the loan up untill the year 2013 :eek:
you need to change your mindset into living off what you have in your pocket rather than spending someone elses money that you haven`t even earnt yet.

Jenna · 12 April 2008 at 4:58PM

Consolidation is a tricky one so to give you both sides of it (as it were):

On the one hand...

If you consolidate it will probably lower the amount of money you have to pay out each month. This will in turn make you feel like you're in less debt, and this can tempt you to spend more as a result (especially if you've been being very tight with your budget prior to consolidating). There's also a risk of consolidating with a loan and then having an emergency (or this could also be Christmas or just general spending) come up and then running up the credit cards again. Many people on this site have done just that and ended up in a MUCH worse position 5 years down the line.

And on the other hand ...

If you have steely willpower and are willing to over-pay the consolidation thing each month, it might possibly be worth doing. But it's only really worth it if you're saving on the interest rate e.g. it's a 0% BT offer or a low LOB offer or something.

My personal recommendation would always be "don't consolidate".

Also - welcome to MSE!

HTH

osones · 12 April 2008 at 5:12PM

Once again thanks for making sense of it!

I have used the snowballing calculator and now I've seen it in action, it does make sense of things and why a new loan wouldn't be the best option!

However, I'm slightly confused about it. Basically, I've put all my debts in with APR's etc and it's given me a list of the debts with how much to pay off. Is the debt with the first blue column the one to pay off first? I presume this method means Direct Debit is not really worth it?

Any ideas?!

Oli

P.S I've just cut my Loan down by asking NW to remove the PPI - plus the refunded me what I've spent already back into the loan!!

boredofbeingathome · 12 April 2008 at 5:26PM

Well good news on the ppi front.
The reason why we say don't cosolidate, is that it is the slippery road back, as you then think you have more credit available, then consolidate again etc. You have spare income to chuck at debts and will get you through quicker than a loan.Also if you have a 0% card then it is not worth putting that onto a loan as you will be paying interest.
Have you thought of upping your income? Have a look at the threads, or see if you can get a second job. Ultimately it is up to you, but i would advise thinking carefully about stuff and making sure you have provision for tax repayment etc.

Fed up with Debt - Time to sort it out!!

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