General debt advice please

Not_Waving_4

Hello all

After bemoaning my debt troubles with a workmate, he recommended I come here for advice. I've had a quick look around (and often enjoy listening to Martin on R2) and it seems like a very good, helpful site, so I wonder if anyone could offer me any advice as to how I should move forward with my debt.

I currently have debts of around £22 000 (£7 000 cc, £11 500 personal loan, £4 000 OD). The minimum or arranged payments for these debts totals to approx. £500/month. Having completed the assessment on the cccs website, I have around £180 spare/month to cover this combined £500 payment, which I would say is a fair assessment of how much I can afford to pay (based on me earning my basic wage), though I could make some savings and a little extra income to bring that up to £250 comfortably. Realistically, I have about £10 000 Equity in my house.

Currently, I'm bailing myself out every month somehow, I've either been lucky (cash windfalls that have propelled me forwards for another couple of months) or have jiggled my money about to cover the necessary payments, but I can see I'll only survive through to February at best before I've completely run out of options. As an example, this month I HAD to use a cc to pay a long overdue gas bill.

I've looked at IVA's, DMP's and bankruptcy, but the real frustrating thing for me is that if I could get a consolidation loan at a reasonable rate of interest I could afford to pay my debts off and make the monthly repayments comfortably (e.g. £22k over 180 months at 11% = £249/m). Unfortunately, after applying to a couple of high street lenders and getting referred further down the chain of lenders it would appear that I can only get a loan in the 25% region, with the monthly payment being nearly double what a "reasonable" or "typical" high st APR is, and nearly double the amount I can afford monthly.

I want to pay my debts off, but at the same time I'm loathe to go into an IVA with my creditors when I could go to them as a legitimate customer and pay them off without having to make reduced payments, ruin my credit rating etc. As I see it, if the banks don't want to make a mutually beneficial arrangement, I may as well go for bankruptcy, though I suppose this is more down to having a bad "up yours" attitude to the banks for their refusal to help me. I honestly don't know what to do for best now, go for bankruptcy and start afresh, apply for an IVA (the only benefit over bankruptcy is to keep my 0 equity house?) or take a 25% loan and hope I can manage to keep the payments up until I can clear it with a lower interest rate loan.

Any advice would be greatly appreciated, as I seem to be heading over the edge of the waterfall and all I'm doing to avoid it is considering my options over and over without reaching any conclusion.

Thanks for reading this, and thanks in advance for any help

doodledo_2

Hi and welcome to the board.

Generally consolidation is not a good option as although this may solve some immediate issues regarding outgoings it often doesn't solve the reasoning behind why you have got in debt in the first place.

People, including myself often consolidate, get complacent and then get more debt.

The best place to start on here is to fill out an honest SOA (Statement of Affairs) this lists all your outgoings, incomings and debts including APRs. You will be amazed what advise comes your way and may well shave a couple of hundred off your outgoings which can then be thrown at your debt. Here is a link for an SOA you can fill out and then post on here http://www.makesenseofcards.com/soacalc.html.

Good luck.

Deep_In_Debt

Hi & Welcome

As suggested, consolidation is not the answer, it doesn't clear your debt - just adds to it. Got the T shirt...many on here have, hence our debts.

If you are thinking of an IVA, look very carefully into it and only use either Payplan or CCCS. IVA's are suitable for a small percentage of people - just check out the IVA forum and BR forum and read the horror stories associated with them.

I would suggest you post up an SOA and the good peeps on here will help you to find a way of reducing your outgoings.

p.s. my pc is a bit slow (like me!) so apologies if this post is repeated.

Not_Waving_4

Thanks for the link and advice. I've completed an SOA (posted below). This is for my household of 1 small car, a wife, a 6 year old child and a 2 week old child. The £200/month payment to the OD debt is what was requested of me by the creditor to prevent them demanding repayment in full. The APR on the loan and misc CC's is my best guess (I don't have the exact information to hand, though I think I'm in te right ball park. The Virgin cc is 35%pa from January, the mortgage is a fixed rate (till Oct next year). The APR on the OD is also my best guess, I fear it may be much higher but will have to check tomorrow.

I'm not sure where there are savings to be made, but I'll be a happy man if someone sees a couple of hundred spare in there.

Thanks again for your quick replies, hopefully by the end of next week I'll at least know I'm taking positive steps to sort out my debt.



Statement of Affairs and Personal Balance Sheet

Monthly Income Details
Monthly income after tax................ 1625
Partners monthly income after tax....... 0
Benefits................................ 120
Other income............................ 0
Total monthly income.................... 1745

Monthly Expense Details
Mortgage................................ 533.49
Secured loan repayments................. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 73
Electricity............................. 64
Gas..................................... 75
Oil..................................... 0
Water rates............................. 45
Telephone (land line)................... 25
Mobile phone............................ 45
TV Licence.............................. 11
Satellite/Cable TV...................... 0
Internet Services....................... 15
Groceries etc. ......................... 300
Clothing................................ 25
Petrol/diesel........................... 130
Road tax................................ 10
Car Insurance........................... 30.5
Car maintenance (including MOT)......... 10
Car parking............................. 0
Other travel............................ 60
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 15
Pet insurance/vet bills................. 0
Buildings insurance..................... 12.18
Contents insurance...................... 21.08
Life assurance ......................... 21.08
Other insurance......................... 0
Presents (birthday, christmas etc)...... 25
Haircuts................................ 10
Entertainment........................... 40
Holiday................................. 0
Emergency fund.......................... 20
Total monthly expenses.................. 1616.33


Assets
Cash.................................... 0
House value (Gross)..................... 115000
Shares and bonds........................ 0
Car(s).................................. 200
Other assets............................ 0
Total Assets............................ 115200


Secured Debts
Description....................Debt......Monthly...APR
Mortgage...................... 106000...(533.49)...6
Total secured debts........... 106000....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
cc Virgin .....................6500......105.......35
OD.............................4300......200.......18
misc CC........................1000......35........15
loan...........................11500.....198.......14
Total unsecured debts..........23300.....538.......-


Monthly Budget Summary
Total monthly income.................... 1,745
Expenses (including secured debts)...... 1,616.33
Available for debt repayments........... 128.67
Monthly UNsecured debt repayments....... 538
Surplus(deficit if negative)............ -409.33

Personal Balance Sheet Summary
Total assets (things you own)........... 115,200
Total Secured debt...................... -106,000
Total Unsecured debt.................... -23,300
Net Assets.............................. -14,100

Created using the SOA calculator at www.makesenseofcards.com.
Reproduced on Moneysavingexpert with permission.

debtfreein4years

can you change supplier for gas and electric to see you can save some money there. also your water rates seem a bit high, are you on a meter or rates?

Not_Waving_4

I'll look into changing supplier for gas & electricity, I've never looked before because I've always been afraid of having to square up with the gas company (British Gas - I always pay my quaterly gas bill about 2 months late, so to leave them I'd have to make a double payment). My electricity account is currently £80 in credit, but they have increase my monthly payment to £64 from £33 anyway. I'll get on with changing supplier immediately though.

My water is rates, not a meter, I'm not sure whether as a family of 4 we'd be better or worse with a meter installed, and I'm not sure how to go about it (don't you have to pay a charge to get transferred to meter readings instead of rates?).

Wookey

Hi there, your buildings+contents insurance looks to be quite high, is that £33 per month x12? Also your life insurance policy, do you feel it is really needed? ie do you have dependents etc who would need it. £60 per month on other travel when you are allready paying for a car, £45 mobile bill and £40 entertainment, cutting back on these will save you at least £100 per month. The virgin cc at 35% apr is a huge bill, i would try to get them to either reduce or freeze the apr.

dancingfairy

Hi - Have you considered a dmp? You have 100 spare after you have paid your regular monthly - which could be reduced slightly by shopping around for electric and gas, possibly lowering you mobile slightly, etc.
This leaves you with just over 100 to be split between your creditors each month fairly. No - they won't like it but you are getting yourself 400 a month into deeper water at the moment and you may well find that your options are reducing. Yes it would impact on your credit rating but unless you can find 400 a month from a combination of savings/cutbacks it would seem a sensible option to consider.
The other option is to perhaps take a break from your mortgage (or go interest only) for a short while in order to pay off your debts, starting with the highest interest one. This is obviously only a short term measure to get you back on your feet - but you need to carefully consider what impact this will have on the length of your mortgage etc.
Can your partner get a second job (or you?) while the other is at home with the little ones?
Anything you can sell to make a little extra to throw at the debts at all?
df

Not_Waving_4

Wookey wrote: »

Hi there, your buildings+contents insurance looks to be quite high, is that £33 per month x12? Also your life insurance policy, do you feel it is really needed? ie do you have dependents etc who would need it. £60 per month on other travel when you are allready paying for a car, £45 mobile bill and £40 entertainment, cutting back on these will save you at least £100 per month. The virgin cc at 35% apr is a huge bill, i would try to get them to either reduce or freeze the apr.

Hi, the buildings and contents insurance is the lowest quote I could get (I took the policy out in May this year). I'll have another look at a few comparison websites to try and find a better quote.

I do feel my life insurance policy is needed, as I have a wife and 2 young sons who are dependent on me.

£60/m for travel is the cost of my wifes weekly saver bus ticket (£15/week) which she uses to take our son to school (she doesn't drive and even if she could the car wouldn't be available to her at least 7/28 days due to my shift pattern). Walking isn't really an option for her, as it's around 3 miles and we have a newborn baby. I'll look into it though, it might be possible that some weeks it's more cost effective to buy individual tickets rather than a weekly ticket.

My contracted phone bill is £35/m, the bill has been coming in higher than this due to overuse recently. I'll see if I can use it more responsibly and maybe drop the tarrif to something a bit cheaper.

I don't see £40/month for entertainment as excessive spending, especially when I've committed to £0/month for holidays. If my quality of life has to reduce to the level where spending £40 over 4 weeks on a bit of entertainment for myself, my wife and my son is considered excessive, I'd rather declare bankrupt, stop working and live on what the social provides. I want to deal with my debt, I don't want to put my family through 5 years of living in poverty just to ensure the banks get what they're owed.

Sorry if I come across as having a bad attitude, but I'd consider myself an idiot to work 42 hours a week on shifts to have a lower standard of living than some families who are dependent on state handouts.

I'm not sure what you mean with the Virgin CC, I should ring them and say "It's far too high an APR, could you reduce it please"? What about freezing it, do you mean freeze the interest at 35%?

Not_Waving_4

dancingfairy wrote: »

Hi - Have you considered a dmp? You have 100 spare after you have paid your regular monthly - which could be reduced slightly by shopping around for electric and gas, possibly lowering you mobile slightly, etc.
This leaves you with just over 100 to be split between your creditors each month fairly. No - they won't like it but you are getting yourself 400 a month into deeper water at the moment and you may well find that your options are reducing. Yes it would impact on your credit rating but unless you can find 400 a month from a combination of savings/cutbacks it would seem a sensible option to consider.
The other option is to perhaps take a break from your mortgage (or go interest only) for a short while in order to pay off your debts, starting with the highest interest one. This is obviously only a short term measure to get you back on your feet - but you need to carefully consider what impact this will have on the length of your mortgage etc.
Can your partner get a second job (or you?) while the other is at home with the little ones?
Anything you can sell to make a little extra to throw at the debts at all?
df

Hi df, thanks for that. I think that it's nigh on impossible to squeeze an extra £400 out of my monthly budget, so like you say, I probably need some kind of DMP. I've used up my mortgage breaks for this year (i think I can apply for another mortgage holiday in January), and am currently on interest only. I agree that a long mortgage break would be excellent to free up some cash to throw at the cc bill, and will definately check it out tomorrow.

I have a second job (of sorts) in that I've started a business with a partner. The business makes very little at the moment, though it's one of the funds I've been using to bail myself out over the past months. After christmas I'm hoping I'll be able to take around £200/month out of it (and eventually I'm hoping it will net me a great deal more), but it takes up any spare time I currently have. I've pretty much ebayed everything I can, save my bike and my guitar, but I don't think it's worth the £250 quid I'd get to sell them (an extra £250 for one month won't help my current £400/m defecit).

I appreciate all that has been said so far, and am sorry if it seems like I'm not trying, but I've been in this situation for about a year now, and I have looked at most of the obvious ways to make savings. I don't have a lavish lifestyle, I have a small, old, economical car (and one which is totally unsuitable for a family of 4 ), don't go out much and I don't have lots of flash consumer goods (e.g. my TV was a second hand set 2 years ago when I bought it off ebay, I don't actually have a kitchen at all - we have a camping hob, a microwave and a grill, my car was a "gift" from a friend (he kindly gave me a year to pay him for it when my car had to be scrapped, I have 6 months to come up with £500 for him).

I don't think it's possible for me to make inroads into my debt by sacrificing a weekly bottle of wine and the occasional takeaway.

I know consolidation is to be avoided, but if I can reduce my committed monthly payment to something affordable, making little savings to throw at the debt would be worthwhile. As it stands, saving even £200/month is like trying to p*ss a forest fire out.

Sorry if my tone seems aggressive, it's just the more I think about it the more it seems like declaring bankrupt is the way to go, which is annoying when I know I could sort my debts out with just a little faith from the lenders. I'll make a list today of everything that's been suggested so far, then tackle the list tomorrow first thing.

Wookey

Hi, had a reply typed out and lost it in the internezt somewhere . K the cc interest rate could be set at zero, more so if there has allready been some added to it, its a longshot but nothing ventured....

Comparison sites don't allways find the best deals, i've mine with quinn insurance, there car insurance quote for me was 200 less than anywhere else i could find, house and contents was a good 130 lower, they are based in Northern Ireland but they do cover anywhere in the UK, maybe worth trying.

No worries about any tude You ultimately are going to have tough decisions to make, should cutting back on your monthly expenses not be a realistic option then some of DF ideas may be worth trying, even if only temporarily.