Major Debt problem

onthemend

Hello All

Ive been viewing this Forum since joining and have now plucked up the courage to advise of our SOA.

To cut a long story short, we have approx £78K of debt in total not including our mortgage. I am a director of a company and therefore BR is not an option. I have contacted CCCS and have a telephone meet. set up for next Wednesday, so any help up front/guidance now would be much appreciated.

So here goes:

Debt

loans: amount left/limit / apr/months left /month cost

co-op flex loan 3795/4700/14%/ - /£83
MBNA loan 3004/7500/9.9%/16/£157
N Rock 1188/7400/8.5%/8/£150

Credit Cards
MBNA 9550/9600/22%/-/£203
M.Stanley 8008/8400/18.1%/-/£163
M&S 7475/8000/15.9%/-/£235
Easymoney 9030/9100/13.9%/-/£230
A&L 4420/4500/11%/-/£84

Store Card
J.Lewis 2601/4000/15.5%/-/£130

Bank Loan

RBOS 21000/29000/8.9%/5.2 years/£466
(incl PPI ins)

Car loan

Toyota 7250/11000/13.5%/8/£242
(incl a final ballon payment of 5755)

Bank O/D

RBOS 750/1000


Total approx £78070


Our monthly income:

Me 1780
Wife 710
Tax Credit 38.27
CH Ben. 113.60

Total income 2641.87
Our Outgoings:

Mortgage 795.41
c.Tax 168.42
house ins 26.46 bldgs+content
water 40.50 meter
gas 40.00
elec 35.00
phone 20.00
internet 14.99

life ins's 167.13
pension 230

TV 10.54
sky 31.00

food 415 incl pet food

2 cars - both needed

Ins/service/tax 110
petrol 150

clothes 20
pocket money 20
gym 32.50
b.days/xmas 40
hols 100

Total Outgoing 2466.95


Our house is worth approx £350,000 with a £200,000 mortgage, so we have some equity, but I don't think I could raise the £78k based on my current income. Plus I would be securing the debt which from the feedback on this board is not the way forward.

As you can see we need help, so please reply with any advice.

thanks

Alleycat

Hi, I am not too sure about the moving money around bit, but on the budgeting side there are a few things which stand out to me!

Gym - Not necessary, can be cancelled - saving £32.50 per month
Hols - with high debts, this is a luxury and cannot be afforded at this time - saving £100 per month
Sky - Cancel, again a luxury - saving £31 per month
Food - I am assuming 2 adults, 2 children, this can be cut (OS board is fab!) - potential saving at least £100
Phone - seems very high. Basic line rental from BT is £11, plus use 1899 etc for cheaper calls - potential saving £5.

There are savings of nearly £270 per month.

Re the mortgage, could you downsize at all, or if you have a spare room, rent it out for a while to gain more income?

Also, the car. You mention that you need two cars. Could you sell the one you currently have a loan for and just buy a cheapie run around? Or would public transport be an option at least in the short term? Its quite a lot you are spending each month on payments!

Plus, cut up the credit cards. I did and its great! No more temptation (I have to admit to a cap one card at the mo, but is only used for shopping and is to repair my knackered credit rating).

Anyway, hope you feel a bit better now you have posted. There are so many lovely people here to help. Good luck!!

brummiebabe

Agree with Alleycat!! Only one thing to add - your life insurance seems like a lot!! Have you shopped around? How much life cover do you have/need???

Well done for posting - more people will be along later with more advice (I'm sure!!)

Bokken_2

Hi,
Well there is plenty to tackle here and it will take a couple of months to get it into a managable order where you can then actively knock the debt down.
been there and done it ,so don't give in there is light at the end of the tunnel .
It looks like the credit cards and the loans have quiet high % this is an area you should target starting with the highest MNBA 22%.,Morgan stanley at 18%.
Have a good read of Martin's articles on credit card shuffle and don't move anything until you understand the shuffle.
It may be possible to get rid of some of the debt like the co-op flexi loan on to the Northern rock as it is at a lower % this will create breathing space and you will be able to get rid of the co-op loan ,this will go a little way towards repairing your credit score as you get rid of debt over the next year or so.This is all explained in Martins shuffle.
hope this helps a little good luck and keep us all updated.

Bestthingsinlifearefree

Hi Onthemend,

good to see you taking positives steps.

Is your mortgae captial and interest ? Could you switch to interest only or extend the term and use the free cash to throw at your debts.

Or more radically sell the house bank the 150K equity. Pay of your debts.

Have 75K left as a deposit for new house.Live within your means, build up your deposit ie start saving money each money /live with in your means.

Get back on the ladder maybe in similar / or slightly down sized property / area.

House prices are generally stagnating at the moment so there is not so much danger in getting of the ladder.ie less risk in prices rising while you are renting.

Who knows as a chain free buyer you might be able to buy back a similar property at a cheaper price than you sold your own. ie you will be buying from a position of strength and could negotiate a discount.

So you have options.

I wish you well.

onthemend

Thanks to all the reply's to date.


I certainly will look at cancelling the Gym, Sky and reviewing the insurances. We think we will look at simple term cover for the mortgage, rather than critical illness.

Would be grateful for any other ideas. Could some one advise what are my critical payments I definately need to pay? ie mortgage/ bank loan/ car loan?.


hopefully CCCs can help next week.

bank_of_slate

Hi onthemend
Welcome to MSE!!
How much is your family's food bill each month, you can often shave quite a lot off it by sticking to lists and meal planning. Clever shopping and making use of BOGOFs are good too!
Good luck & keep posting
...Linda xx

tomstickland

Or more radically sell the house bank the 150K equity. Pay of your debts.

Have 75K left as a deposit for new house.Live within your means, build up your deposit ie start saving money each money /live with in your means.

Get back on the ladder maybe in similar / or slightly down sized property / area.

House prices are generally stagnating at the moment so there is not so much danger in getting of the ladder.ie less risk in prices rising while you are renting.

I had the same thoughts.

Xbigman

If your credit rating is still good then you probably want to downsize your property and clear the debt. There is a 'but' with that. You absolutely must stop the overspending that has run the debts up. If you don't you will be back here again in 5 years.

The other option is an IVA. You need a good free income to get it to work, £400+ a month that can go towards debts. That is do-able with your income.

Budget wise, dump the pension payments. Having a pension but carrying huge debts into retirement is pointless. This has to get the chop for the next 5 years or more whilst you zero your debts.
Regards



X

gallygirl

onthemend wrote:

Thanks to all the reply's to date.


I certainly will look at cancelling the Gym, Sky and reviewing the insurances. We think we will look at simple term cover for the mortgage, rather than critical illness.

Would be grateful for any other ideas. Could some one advise what are my critical payments I definately need to pay? ie mortgage/ bank loan/ car loan?.


hopefully CCCs can help next week.

This is one 'luxury' I wouldn't dispense with - as it's your own business you'd have no back-up if you were seriously ill. However, use www.moneysupermarket.com or similar to reduce payments, and poss reassess monthly pay-out???

southernscouser

I know this may sound really obvious and unhelpful but it was something I just never considered (as daft as it may sound)!

Now this is just based on assumption but I get the impression you are for example paying £100 off a credit card then putting £100 back on the credit card. This means you are not making ends meet and obviously something will end up giving!

This isn't unfortunately a quick fix answer but a spending diary is a great way of finding out where this £5 goes and that £10 goes! It all adds up and might surprise you what you spend! Make sure you note down every penny you spend and on what!

Also what is your credit rating like? Have you kept up with all your payments? If so try applying for 0% card or low life balance transfer card. This way you can cut down the amount of interest you are paying!