£40,000 debt at upto 16.9% - worried sick Newbie!

Kate_Smiley · 2 January 2006 at 11:13PM

Hi All,

My partner has almost £40,000 debt on credit card and current accounts, at up to 16.9 % APR. (The credit card debt of £35,000 is all at rates 14.9% and above. The other £5,000 is overdrawn current accounts with monthly fees and interest.) Mostly he is paying minimum payments, which can be £250 each card anyway.

On top of this we are paying interest only on our mortgate, and the debt never seems to get any smaller - I think it is growing.
:eek: I want to make a new start on money with the new year, but don't know where to begin!!!

How can he borrow enough money at a low enough rate so that we can start to pay of the debt?

Background:
As he has been consistantly paying (be it minimum payments) our credit rating is more likely to be affected by the fact that he has so much credit already.

He wants to consolidate this into our joint mortgage. I want to find a different way as this debt really scares me. I expect this would be more expensive over the long term, and the pressure and arguements are affecting our relationship.
Our current mortgate is £125,000 plus an overdrawn reserve of £5,000, and the house is probably now worth £200,000. 3 years ago, we went joint on the mortgage and at the same time he consolidated a chuck of his debt at the time into the mortgage, but not all of it. I am very nervous about doing that again.

My credit card debt at £1,000 is peanuts in comparison, and I could pay it off with my salary. It is causing resentment that the debt is all in his name.

I only use credit as for cash flow or as a last resort. I have some debt too, but at £1,000 this is peanuts in comparison, and I could pay it off with my salary.

I don't understand

why he keeps spending money while he has so much debt. He buys things he does not need, and it seems to me now that he could not afford. But as long as he can pay the interest he carries on spending. He thinks he is better than he was. He is worried there might be redundancies at work so is now very stressed and wants to re-mortgage at lower rate and consolidate the debt at the same time while he still can.

If I am not working, I don't spend on anything except essentials, and I make sure I do not have debts to worry about. If I am working, I don't spend more than I earn. However I did have stress and depression that meant for 15 months spread out over 4 years I was not working. He thinks that because of this, some of the debt is due to me. (He already had large amounts of debt and high spending habits so does not blame it all on me.)

Today I made him add up how much of the debt he thinks is down to me. He added this up to over £5000, based on the household bills and a couple of expensive holidays we had in the time I was not working. If needs be to stop the arguements and resentment I would take this part of the debt in my name. As I now have a good salary credit for me should not be a problem.

On top of this, I was thinking of buying a nearly new car, which he is pushing me to do. But with so much debt, and concern that my work contract is up for renewal in mid March, I think I will have to cancel that, as I am getting more and more stressed.

We have been together since '94 and lived together since '99, but money is a constant area for arguement as we think and act so differently. Any ideas?

Please post a reply!

1. How to start reducing the debt? OR
2. How to stop argueing about it? OR
3. Just to let me know we are not loons or alone!

Thanks for the chance to get this off my chest! And Happy New Year!
Kate :xmassmile

steverockers · 3 January 2006 at 12:35AM

See my posting of today -- alternative to life of balance transfers. I was in much the same position, although I have not wasted money. I rebuilt a house in France on credit cards. Maybe not very wise, but an investment of 50,000pds now gives an income of 10,000pds/year which can't be bad and the house has increased in value to 150,000. If you can get the bank to play ball, you could pay back whatever they let you borrow in four years with the same minimum payments that you make to cc companies.
If the manager had not contacted me, I would never have had the courage to go to them. Now that it is sorted, it is a great relief. I have some further credit card debt not covered by the bank loan. As I now have 21,000 unused credit on cards, I am going to tart this on one of the 9 month 0% schemes.
I hope this helps.

katoe · 3 January 2006 at 12:37AM

The cost of your bad debt is too high as the interest rates are very high. On this point, I think the best way to clear it is to remortgage your home to the max to pay off all these debts as this way, you cut the interest rates dramatically.

Then, once you have paid all your credit card debts, cut off all yours and his credit cards(as it seems like there's no control on the spending on consumer items) except for 1 or 2 max. But mainly, just use the credit cards for emergencies, or pay them off every month if you use them.

Though there may be a lot of 0% credit cards there for purchases and balance transfers, it's the attitude towards access of credit (via available bal on cc) that is worth considering. That's why I still urge you to cut them off once you have paid for them.

When you remortgage, you start your term again so, around, 25 years from the date you remortage. Even if it is interest only, once you get better at saving and spend less on consumer spending, then you can pay some of your mortgages (flexible mortgage).

By the way, this is just my opinion and what I would do if I was in your situation. To those who do not think the way I think, please do not be nasty. I am just trying to help.

mrcow · 3 January 2006 at 12:48AM

Kate_Smiley wrote:

Please post a reply!

1. How to start reducing the debt? OR
2. How to stop argueing about it? OR
3. Just to let me know we are not loons or alone!

Well you certainly aren't alone (can't comment on the loon part though as we've not met!).

You are so right not to be putting this debt on your mortage, as he's already proved once that doing this just gives him the green light to rack up even more debt, and it could be putting your home at risk.

The answer lies with a turnaround in attitude towards the debt. It sounds like you are already there, but he needs to be there too. The solution is there for you, but it will be long term and will not be easy. He's going to have to be as committed as you for it to work.

Once you can agree on this, the arguments will get better (as they will be more positive), can't guarantee that they will stop though. Debt is stressful, especially if there's resentment on one or both sides. You both need to forgive and forget and work together.

The new year is a great time to start btw.

And welcome to the boards.

mrcow · 3 January 2006 at 12:55AM

katoe wrote:

The cost of your bad debt is too high as the interest rates are very high. On this point, I think the best way to clear it is to remortgage your home to the max to pay off all these debts as this way, you cut the interest rates dramatically.

Then, once you have paid all your credit card debts, cut off all yours and his credit cards(as it seems like there's no control on the spending on consumer items) except for 1 or 2 max. But mainly, just use the credit cards for emergencies, or pay them off every month if you use them.

Though there may be a lot of 0% credit cards there for purchases and balance transfers, it's the attitude towards access of credit (via available bal on cc) that is worth considering. That's why I still urge you to cut them off once you have paid for them.

When you remortgage, you start your term again so, around, 25 years from the date you remortage. Even if it is interest only, once you get better at saving and spend less on consumer spending, then you can pay some of your mortgages (flexible mortgage).

By the way, this is just my opinion and what I would do if I was in your situation. To those who do not think the way I think, please do not be nasty. I am just trying to help.

Hi Katoe,

I'm not nasty, but I don't agree with much of what you have said.

1. Remortaging should be a last resort. As a general rule looking to secure debt from previously unsecured debt is not a good plan.

2. Even if you do....who says that you need to start back at 25 years? This just makes it even more expensive. You should be looking at the shortest term that you can afford.

3. Also, don't keep ANY credit cards for spending on. He obviously can't control his spending, so cancel the high APR cards, look for 0% balance transfers and work at paying off the debt, rather than just interest repayments or switch some to an unsecured loan on a lower APR.

I absolutely agree with your view on spending though. Kate needs a clear workable budget, and needs to look at all outgoings and how to reduce them, and also how to maximise income wherever possible.

Take care.

tomstickland · 3 January 2006 at 1:00AM

You need to work together to get him to face up to the problem.
Once he faces up then hopefully the pointless spending will stop.

Really, a big turnaround in attitude is needed. You are in a siege position financially, so you need to batten down the hatches.

The APR on the debt is very large.

Pointless spending must stop. Sell off all unused/unncessary items.

Take "your" £5K of the debt and put it onto a 0% credit card so you can pay it off at your leisure. This way you can appear to be accepting "your" bit.

Moving the debt onto the mortgage is probably a good way of reducing the APR. Whilst you're at it you should switch to a repayment mortgage. Analyse the increase in monthly payments into the part attributable to debt and the part attributable to paying capital.

Start a daily financial spreadsheet so you can see how much money you are spending.

mummytofour · 3 January 2006 at 1:04AM

you cant help him if he wont help himself!
If you re-morgage AGAIN to pay off his debts, whats going to happen next time?

I think he needs to change his ways and until he does I would keep all your finances seprate. Direct him to the CAB or martins budget sheet, if he does not see that he has a problem then he will just run the debts up again.

Good luck
Vxx

Little_Miss_Winner · 3 January 2006 at 9:16AM

Please DO NOT consolidate onto your mortgage.

I haven't worked out what figures you are paying back each month on your mortgage, BUT if you borrowed an additional £40k over 25 years, READ THIS:- "Taken from a well-known debt calculator"

For example, according to the figures you've just entered, you currently owe £40,000.00. If you consolidated that into your mortgage at, say 5.5% over 25 years, you'd end up paying £33,690.50] in interest.

Thats another £74 k on top of what you already owe!!!!!

£33,690 in INTEREST!!!!!

Please think carefully!!!

Love
pot
xxx

conradmum · 3 January 2006 at 9:46AM

Another reason not to put the debt onto your mortgage, that has not yet been mentioned, is that currently the debt is in his name and if it goes on the mortgage it will be in your name too!! And the mortgage is already carrying a wodge of HIS debt. How convenient for him for you both to change the mortgage to joint names!!
Why should you be liable for the debt his wasteful spending has run up?
God forbid you should break up, but if you do, you will have to pay off his debt. Doesn't seem right to me!

steverockers · 3 January 2006 at 12:53PM

No one has mentioned the 'nearly new' car. Cars are a status symbol. if you need to change your car, buy something reliable and really cheap. A year ago I bought a 1989 Volvo 240 estate from a friend for 100 pds. The end cost after MOT etc is closer to 400 but it is comfortable, reliable, rust free and there is no depreciation. Pay 6000, and you are increasing your debt by 15% and loosing atleast 20% of your money per year in depreciation -- not very good financial practice. To be honest, I also have a 1975 Rolls Royce in the garage, but that is another story!

tomstickland · 3 January 2006 at 2:09PM

I've never paid more than £1200 for a car in 12 years and have done circa 20K per year in that time.

£40,000 debt at upto 16.9% - worried sick Newbie!

Comments

Confirm your email address to Create Threads and Reply

🚀 Getting Started

Categories

Is this how you want to be seen?

Get our FREE Weekly email full of deals & guides - and it’s spam-free