We are in debt- any tips?

BaritoneUK

Hi all,

We have been trying to money save for the past 3 months since finding out about this website. We've done the following:

1) Moved to TalkTalk and use 18866 and saved £££ on our phone bill.

2) Gone through to Orange Retentions and cut our mobile bill.

3) Changed Gas and Electricity supplier using uswitch and saved money there.

4) Got cheaper car insurance using confused.com

5) Moved nasty credit card bill to Barclaycard 0%

6) when we need to buy things (for us or friends/family) we use shopbots to get best price.

The only other thing we need to do I think is get our grocery bill down.

The main problem is that we have a loan that is £365 a month and this is by far the biggest outgoing. We struggle to pay it and we are paying overdraught fees and are always in the red.

The loan is for £8600 and has another 2 years to pay. I also have a credit card for £3600 on barclaycard 0% and my wife has a barclaycard for £1800.

My dad has very kindly offered us the chance of doing a loan with him. If we cancel the loan with HSBC (at 7.9%) he will give us a loan for £10000 over the next 5 years. We wanted to model it on the Northern Rock one for 5.6% so that he gets a bit of interest. That would be roughly £200 a month and we would have the option of missing the odd payment sometimes (as long as we paid him back in full) Also we could then start to tackle credit card debt.

Is this a good idea? Anything else we should be looking at?

svmitche

Please be careful borrowing money from a relative. these things have a tendency to go south very quickly if not handled right.

I'm not trying to snipe at you, but I am concerned that you are already saying 'we can miss a few payments if need be'. I know you also added that you would pay the lot back in full, but if you are going to borrow from your father over five years, then you must pay back what you say you will over the time period that you specify. You are already paying the £365, so you will be saving £165 per month, so you really don't have an excuse to miss a £200 payment to your dad.

You wouldn't dare miss a payment to a loan company, so this should be no different.

Please don't think I am lecturing you, I just advise caution!

jue

Firstly I would like to say well done with what you have already achieved.
I would also like to say be careful when borrowing from a relative, it all depends on your relationship and could it hold up to this.. a difficult one...
Lastly as for saving money on outgoing such as food I would recommend you look at the two forums on this board.... saving money old style and the families board, both have amazing tips for saving heaps of money and getting down your bills.

Rafter

Loan from family does sound like a fix, but you will be spreading the repayment of your exising loan over a further 3 years.

If you borrowed the money to buy everyday stuff or a car, are you still going to be paying off the loan long after the stuff you bought has gone?

Your dad may have to pay income tax on the interest income on the loan too depending on the sums involved.
You may be able to get around this by 'gifting' him the interest payments each year given the sums involved.

Key thing is making sure you don't get any further into debt. Make sure you get your budget balanced and pay off as much debt as possible as quickly as possible, rather than be tempted to spend the money left in your current account at the end of the month.

Good luck

R.

BaritoneUK

Thanks guys.

Good advice. When I said I could miss the odd payment- I mean only in dire circumstances. It just means we would have the flexibility to pay the loan off earlier if we can, but miss 1 or 2 if things get difficult. Also I suppose we could always swap the sum over to a proper loan halfway down the line.

Many thanks!