Debt reaching crisis point

carpenter

Hi All

Any advice gratefully received.

Wont bore you with all the details of how I got to where I am but financial situation is this:

Bank Loan of £3000 at 50% apr so monthly payment is £140
Bank Loan of £2500 at 40% apr so monthly payment is £125
Friends Provident loan of £500 monthly payment is £60
Credit card balance is £1350 and have failed to make payment for 4 months
Bank overdraft is £900 (bank requiring repayment at £100 a month to reduce to £0)
Car HP of £8000 - payments of £237 a month (car worth less than outstanding balance so selling not an option- could afford to keep this HP going if could reduce other debts)

All loan payments have been made on time and up to date. Outgoings to loans/HP/overdraft/Credit card are equal to 40% of salary

Credit history is not strong as have 3 year old default and bank problems in last 12 months

Just to add to difficulties Tax Credits overpaid us and therefore have stopped payments for next 10 months to recover sum overpaid.

Bank not very helpful. Consistently declined to help me but have been happy to charge in excess of £1000 in last 12 months in charges and are unwilling to give me a consolidation loan.

Have presented them with figures showing loan at bank rates would reduce outgoings by in excess of £200 a month due to better apr rate and would only extend overall payment period of current loans by 8 months.

Wife and I are wary of going to debt management company as concerned credit score will be damaged for LIFE and therefore no hope of mortgage etc in the future.

We barely have money to eat never mind have a life and finally, wife is due to give birth to child number 2 in 4 weeks.

Any ideas, desperately need help.

tattooed_lady

Hi

How much do you have left to pay on your loans and car hp? Are the figures you quoted the outstanding balances or the initial loan amount?

A consolidation loan with the bank would only add more to the debt and is not a good idea.

I think that a FREE debt agency such as CCCS or Payplan would be a good idea.

Your credit would be affected for 6 years from default, not life.

Can you post a detailed breakdown of all your income/expenditure so that people can see if they can help you cut back?

Good luck.

Fran

carpenter wrote:

Credit card balance is £1350 and have failed to make payment for 4 months........................

Credit history is not strong as have 3 year old default and bank problems in last 12 months..................................


Wife and I are wary of going to debt management company as concerned credit score will be damaged for LIFE and therefore no hope of mortgage etc in the future.

We barely have money to eat never mind have a life and finally, wife is due to give birth to child number 2 in 4 weeks.

It sounds like your credit score is already damaged and certainly if you carry on as you are it's going to get worse. Please don't be wary of going to debt management company - they know what they're doing! When you go you will have to stick to the agreed payments though. Get it done now, before the birth of your next child when you will have enough to do. Don't forget to inform tax credits and child benefit etc. of your new baby when s/he's born. Let us know how you get on, but don't put off getting help.

saki_2

Considered bankruptcy?


Its not the end of the world that it once was, and if you are not living in a house with a sizeable chunk of equity you get to keep your house.

crossleydd42

I think that bankruptcy is the absolute last resort. True, it's not the shameful thing it was, but it does little for one's self-esteem - and you lose control - see this:

http://www.insolvencyhelpline.co.uk/bankruptcy/effects-of-bankruptcy.htm
.
The earlier suggestions are best; to start with.

I say this all frankness - I detect resentment that banks have got you into this position, but you needn't have taken their offers up. If you face up to this fact, it's half the battle and will help you avoid future problems. You know now that the easiest way out is often the hardest in the end. But good luck - I sincerely mean this.

carpenter

Breakdown of balances outstanding if loans paid off today is:

Loan 1 £2100 30 payments of £125 to make
Loan 2 £2400 26 payments of £140 to make
FP £ 350 8 payments of £60 to make
O/D £ 900 9 payments of £100 to make
CC £1350 13 payments of £100 to make

A loan of £7100 at 10% apr would clear debts in 36 months, free up nearly £300 a month, which would greatkly reduce pressure and including money already paid to debts cost only £500 more than current arrangement will cost, and all debts would be extinguished 10 months later than currently.

But of course the bank wont lend me the £7000 and have no relatives who could.

jamesp_3

carpenter wrote:

But of course the bank wont lend me the £7000 and have no relatives who could.

And this is rediculous. What bank has given you a loan with 50% APR and won't let you move it to a cheaper one? They deserve to be named! Its scandalous and bad enough to go to watchdod with.

James

rprinter

Hi carpenter,

If you could get such a loan, that would do the job. But if you can't you need plan B:

As ruyareece has suggested the free charity based Debt Managment Plans look like your best bet. You need to lower the repayments and interest, you have tried the bank and they won't play ball. CCCS (see link at top of page) or https://www.payplan.co.uk can speak to your creditors on your behalf. You will need to work out a full income/expenditure budget and they (and we) can help you with this.

They will try and get the interest frozen, then work out what you've got spare each month to be spread pro-rata amongst your creditors. Each month the amount you pay goes to repaying the debt rather than revolving interest.

Avoid any debt managment plans that charge you: the banks are well used to dealing with the two DMPs mentioned. And every pound you pay goes to your creditors.

Also I would recommend opening a different bank account to use whilst all this is going on.

Good luck & let us know how you get on...

r

carpenter

How could I open another bank account?? Surely through credit score they will identify already have an account and refuse to give me one because I have an overdraft with current one.

Robert_Sterling_3

carpenter wrote:

Hi All
Wont bore you with all the details of how I got to where I am but financial situation is this:

Bank Loan of £3000 at 50% apr so monthly payment is £140
Bank Loan of £2500 at 40% apr so monthly payment is £125
.

I won't bore you with how I came to this conclusion but ...

... I do not think the APRs on these two items are 50% and 40% respectively.

The only reason I mention this is that if you think they are 50% and 40%

you might think changing to a loan at 30% would be a good idea.

I do not think it would be.

rubytwilight

You can open a basic bank account, with no overdraft. Some give you a debit card such as electron.
I had an overdraft and it was suggested it was best if i added these to my debts and get a new basic account.
Off the top of my head I know that the Co-operative bank and lloyds do such accounts. Be careful that the bank you open a new account with are not linked to any of your creditors, example I opened an alliance and leicester and foud they are linked to MBNA (one of my creditors!) .
Get some advice as soon as you can as its a lot to juggle on your own.
I wish you the best of luck, I spoke to Payplan this morning to try and get my own debt horrors looked at- don't know how I will get on but they are not judgemental at all and its always good to get some advice.
I'm sure you will get a lot of support from these boards too!