Debt clearance advice

NiciD_2

Hi,
I’m new to this site and am finding the advice so far really helpful and through reading this forum am relieved (if that’s the right word to use!) to hear there are so many other people out there in similar situations to mine. I’ve always been terrible with money and have gone through life with the attitude “if I want it I’ll find a way to buy it and worry about it later!”. I’m now 28 and have wised up a bit having reached a point where I desperately want to get rid of my debt and actually begin to save for a deposit on my own place but I’m finding it difficult to see a way out at the mo! My debt is as follows:

Egg Card £4570 (not sure on % but paying about £90 a month – min payment)
Tesco Card £3500 (again not sure on % but paying min payment of £100 a month)
Co Op Loan = £3500 left (6.6% paying £137 a month due to be paid off Oct 08)
Overdraft = £2000 (costing about £20 a month in interest)
TOTAL = 13, 500

I know this might seem like not a lot of debt compared to some of the threads I’ve read on here but the above payments coupled with all my other outgoings (bills, rent, food etc) are crippling me.

I went to see my bank (Lloyds) for advice as I’ve been with them 11 years and thought they might be able to offer me a low interest loan. However, the best they can offer is 10.7% which I personally think is high. They advised that I keep paying off my existing loan as that’s only 2 years from being paid off completely and said they can either offer me:

- enough to pay off both my credit cards and overdraft = £10070 at £213 a month for 7 years or
- enough to pay just my credit cards = £8070 at £171 a month for 7 years.

I’ve also recently applied for a 0% balance transfer for 9 months credit card which Ive been accepted for with a limit of £5300.

Now I’m not sure what to do! I’ve looked at all the loans/credit cards advice on here and I’ve made a start on the budget planner - but that might take some time as I need to think really hard about all my outgoings. In the meantime any words of wisdom will be greatly appreciated!!

skintchick

Why don;t you post a full SOA and we can advise better?

It's hard otherwise. You say your food, etc is crippling you but we may be able to help you get those bills down and give you some breathing space.

CLAPTON

You need to post a SoA and must include the APRs ...can't compare two loans without knowing both.

Without the SoA I hestitate to give any advice but given you age and stated wish to get a mortgage in the future, consolidating loans seem a really bad idea, much better to try to pay your CC off asap.


also , my calculator says that for a loan of £8070, at 10.7% over 7 years (84 months) the monthly repayments should be £136....i guess they have added PPI..another bad idea


If you browse the bulletin board you will see examples but the general format is

: statement of income:

: statement of expenditure
this should be quite detailed but excluding debt repayment
: a subtotal to save us all having to add it up

: statement of all debts including:
for Credit cards show: outstanding amount, monthly repayment , APR
for loans/HPs show outstanding amount, monthly payment, APR and number of months still to pay;
Say whether you are paying PPI on your debts

a subtotal of the total debt and of the total repayments, to save us having to add it up

also add a brief details of your situation, partner, any children, rent or own property, value of house and mortgage, any special circumstances that are relevant

NiciD_2

Thanks both for your replies. I'll get to work on an SOA and come back when I've worked it all out.

ms_london

Also, if you can find out what the APR on your debts are, that would be even better!!

At the moment I would stay away from the consolidation loan. Post back with your SOA and we will see what we can do to help.

xx

NiciD_2

This took me ages to work out and has now totally depressed me and made me want to cry as my debts are slightly worse than I'd thought
Anyway, here goes!!:

Income = £1284 wages a month after tax
No other source of income/benefits

Expenditure

Rent £460 (I’m single and renting a flat on my own – no kids.)
Gas £25
Electric £20
Water £11
Gym £38
Internet £16
Mobile £30
Phone £20
Council Tax £64
Overdraft £21 (limit is £2000 and I reach this every month)
Life insurance £ 7
Petrol £50
Catalogue £15
Trade union £9
Food bill £75
TOTAL £852

Debts

Egg Card £90 (Total remaining is £4570 APR is £15.9% Limit is £5000)
Tesco Card £106 (Total remaining is £3800 APR is 15.9% Limit is £5500)
Co op Loan £137 (The total remaining is £4111 APR is 6.6% and no PPI – pay off date is 1/9/2008)

TOTAL = £333 TOTAL DEBT = £12 481 (14481 inc overdraft)

Phew!…..So after all that’s paid I have £99 left over which generally goes on going out, toiletries and any other bits n pieces that come up. I have to admit this month Ive been spending on my credit card as Ive already reached my od limit and had to pay car tax and renew my car insurance.

I’ve just been accepted for a 0% 6 month balance transfer for another credit card with a limit of £5300.
I think you must be right Clapton, the loan I've been offered by Lloyds must have PPI included but they didn’t tell me this at the time.

Its giving me a proper headache trying to decide whether to take a massive loan and pay off all debt or transfer my balances around so any advice you guys can offer will be great. Thanks in advance.

Ceri_2

hiya,

I'm no expert as I only joined last week, but I would ask how much is owed on your catalogue. I would note this down as a debt.

Also are you on a mobile contract? If so and not within your 12 month contract, call them & tell them you are gonna have to cancel to save money. I did this earlier this month with O2, I was paying £35 a month & my contract was up end march, so I called to say I needed to cancel & was gonna go O2 pay as you go, £10 a month to get 300 free texts. They offered me 500 texts, 100 mins & a free phone - which I took! (saving £300 a year)

your food bill is only £5 less than mine a month & I have 2 ppl in the house, maybe you can looking at cutting costs there - without going hungry!

Gym & internet. Hmm tough ones. Many would say do you really need the gym? I'm not, all I will say is, can you afford to go to the gym?
Internet. £16 is not bad. I'm cancelling my broadband in a week or so to save me £25 a month.....£300 a year & £300 off my cc.

Putting it like that for the gym, it's £38 a month, which is £456 a year....£456 off your debt.

£99 for going out/toilteries etc. Seems a bit excessive to me, but I never go out anywhere (can't afford it.) I give myself £30 a month & this month it won't work cos I have an eye test & I know I need new glasses.
Perhaps you could think about dropping it down, think about if you could manage on £50 a month. That would give you a further £49 towards your debts, that's £588 a year.

I had to look at the savings over a year cos £25 a month for net didn't seem much till I realised it was £300 a year.

Ceri

southernscouser

I would advise against taking out the loan. Generally speaking consolidation is a lot costlier in the long run.

The most effective way is to get your debts down to the lowest APR possible.

Now I would personally transfer the £4,570 from the Egg card to the new 0% one! The reason for this is that your min. payment on your Egg card is 2% and 3% on your Tesco. This way you are paying an extra percent back on your Tesco one where as opposed to your Egg one!

You then need to cancel your Egg card and ask for a letter of confirmation that the account has been closed!

If you think your credit rating is half decent you should also consider applying for a low life of balance card. This if accepted would reduce your Tesco APR to say 4.9% if you went with the BA Amex card or similar that is currently on offer!

Also start a spending diary. Everyday note down exactly how much you have spent and on what! This was a great way for me to see where the "surplus" money was wasted!

Lydia.42

Hi niciD
Well done for getting all the info together.

I would look at moving all of your egg balance to your new 0% card, and any of Tesco's that will fit. Don't get rid of Egg though. Once it shows zero balance, give them a call and ask if they will give you a better rate as you would like to keep your businees with them. Be nice, and they may drop your current rate. If so, transfer the remaining Tesco's to Egg.

If they say no, you haven't lost anything (A & L have just given me 6 more months of 0% by doing this). Concentrate on paying the higest interest debt first, then once that is cleared move onto the next.

Don't go down the consolidation route unless you really have to. Without learning to budget, and why you over spent in the first place, you risk increasing your debts further by continuing to spend..........believe me i have been there and have more than one t-shirt to show for it :mad:

More people will be along soon to help, don't worry you are in the best place and amongst friends.

Good luck

L

NiciD_2

wow, am I glad I found this site! :j
Thank you so much for all the great advice so far.

My catalogue debt is £200 interest free. I’m paying the minimum fee of £15 a month at the mo.

I'm also on an o2 contract £30 a month for 500 free texts and 50 free mins. I hardly use my phone for calls but do text quite a lot. The contract comes to 12 months in May so I might take your advice Ceri and see if they can offer me a better deal. You’re definitely right about the food bill – I was quite shocked when I worked out how much I spent! So I’ll start budgeting as of next month and see how I get on.
As for the internet – I’m stuck with my current contract with Aol until August but it does seem cheap compared to other providers so I may stick with them.

With regard to the gym fee, it is something I seriously considered giving up loads of times but to be honest its something I really benefit from. I go most evenings and it’s the only thing I do week nights. Its my stress relief and really helps clear my head after a day at work. If I didn’t go I’d turn into a lazy slob plus Im training for a sponsored run in the summer so I need to keep it up. I think once I’ve done the run I will reconsider giving it up though!

As for the loans advice, I’m really glad you advise against taking one out as my gut feeling was that it was a bad idea. It felt like I'd just be prolonging the debt.

I will definitely have a look at those life of balance deals that are around at the mo southernscouser and thanks for the advice on keeping a spend diary – I think I’ll give it a go! And thanks Lydia for the advice on “sweet talking” Egg – will defo try it!

Thanks again guys, this is proving a real learning curve for me and I’m already starting to feel better just for having written everything down and finally facing what my actual debts are. . I’ll keep you updated on how I get on!!
Nici

Chortle_2

Glad you're feeling a bit better NiciD - facing up to it all is hard, so you've done really well just to list it all out

I'd have a look at the old style boards, they have some fantastic tips for getting your food bills down and loads of recipes etc that are scrummy, but v. cheap!

Not a lot more I can see to add at the mo, but def look into more 0% deals, or low LoB cards, and steer clear of consolidation loans - they're the reason a lot of us are where we are (or where) with debt I think! So many people on here say that they got into debt, consolidated, didn't learn, and built the credit back up, consolidated again, etc etc, ad nauseum! Learn from our mistakes Even if you trust yourself not to build the credit back up after taking a loan, they generally take longer to pay back and cost more, so doubly not worth it!

Spending diaries are a brilliant idea as well, I started doing it ages ago, and was horrified at how much all the 'little bits' and 'treats' added up to!! I never really used to look at prices, and used to heamorrage money on stupid stuff. I think thats something we all do to some extent - until you've been hit with the MSE bug anyway Join in with the 'what have you spent today' threads, set yourself a daily/weekly spending limit, and see how it goes. It normally takes a while to find a level that you're comfortable with, but its a very good way of understanding your spending habits!

Oh, and your catalogue and OD are definitely debts, so you should include those in your totals! (sorry, I know it makes the totals look worse!)

Good luck with becoming debt-free, and welcome to MSE :beer: